How to File Newborns on Taxes
When you welcome a newborn into your family, myriad details will require your attention. Researching the tax implications of your new family member might not be very high on your to-do list, but you should take a few minutes to learn how to include a newborn on your tax forms. A dependent child can significantly reduce your tax liability. That's good news because you've got a lot of diapers, toys and baby clothes to pay for.
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Instructions
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Claiming an Exemption
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Enter your newborn's name in the "Dependents" section on line 6c of your federal tax form. To claim dependents, you must file Form 1040 or Form 1040A (the short form); you cannot use 1040EZ, which is only for people with no dependents.
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2
Enter the newborn's Social Security number, or SSN. Every dependent must have an SSN. Many hospitals provide parents with the form to apply for an SSN for a newborn at the same time they handle the paperwork for the birth certificate. If your child does not yet have an SSN, see the link in Resources for information on how to apply for one.
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Indicate the child's relationship to you: for example, "Son," "Daughter" or "Grandchild," if you are the legal guardian.
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Check the box if the newborn qualifies for the child tax credit (see next section for details).
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Make sure to include the child in the space provided for the number of claimed children at the end of line 6. Each dependent child claimed in this section will reduce your taxable income by a certain amount. The amount is indexed for inflation and varies from year to year.
Claiming the Child Tax Credit
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6
Use IRS Publication 972 (see Resources) to determine whether the newborn qualifies for the child tax credit. The credit directly reduces the amount of tax you owe, not just the amount of income subject to tax.
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Figure your adjusted gross income (AGI) using your Form 1040 or 1040A. Your AGI will be at the bottom of the first page. For most taxpayers, the tax credit will be $1,000, but if your AGI is above a certain threshold, the credit will be reduced. For 2010, that level was $110,000 for joint filers, $55,000 for married filing separately and $75,000 for all other filing statuses. This threshold level is subject to change from year to year.
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8
If your AGI is below the threshold for your filing status, enter $1,000 on the line for "Child tax credit" in the "Tax and Credits" section of your tax form. However, see "Warnings" below.
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If your AGI is above the threshold, use the worksheets in Publication 972 to figure your credit. Enter that amount on the line for "Child tax credit" in the "Tax and Credits" section of your tax form.
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Tips & Warnings
If you are claimed as a dependent on someone else's tax form -- your parents, for example -- then you cannot claim any dependents for yourself. The newborn may qualify as your parents' dependent.
A dependent can be claimed on only one individual's tax form. In cases of divorce or separation, the dependent is usually claimed by the custodial parent.
You cannot claim a credit for more than the total amount of your tax. If your tax is $850, then you can only claim a credit for $850.
References
Resources
- Photo Credit baby image by Dron from Fotolia.com
