What Is the Difference in Taxes After a Baby?

New babies lower tax obligations.

Having a child can dramatically affect your taxes. Parents typically see the greatest tax benefits after having their first child, but tax benefits continue with each additional child as well.

Effects

Having a baby has several positive effects on your taxes. Most taxpayers qualify for a $1,000 tax credit for each child. As of 2009, if your income is less than $35,463 for single people or $40,463 for married people, the IRS provides an earned income credit up to $3,043 for one qualifying child. In addition, working parents can receive a child care credit of $600 to $1,050 for each child. Each child also shelters $3,650 of your yearly income, which may result in a savings of $912, depending on your tax bracket. Sheltered income is the portion of the income that the IRS does not tax.

Expert Insight

According to the IRS, you should change your W-4 with your employer after the birth of a child. Adding the child as another dependent on the form can increase your take-home pay by as much as $150 per month. The IRS also advises that single parents change their IRS filing status form single to head of household after having a child. This status change results in higher deductions.

In addition, the IRS advises that parents consider contributing to a Section 529 State Education Savings Plan for your child can also reduce taxes.

Considerations

Any child claimed must have been born by December 31 the prior tax year. In addition, parents must have a Social Security number for all children on their tax return. The best time to apply for a Social Security number is when applying for a birth certificate at the hospital soon after the baby's birth.

References

• TurboTax: Have a New Baby
• TurboTax: Birth of a Child
• IRS: Qualifying Child
• Virginia Cooperative Extension: Children and Family Finances: Tax Benefits