Having a Baby: New Tax Credits & Benefits for Parents
Bringing a new baby into the world is exciting, overwhelming, and let's be honest, it's not cheap. As a tax professional, I love being able to tell new parents that there's actually some good news when it comes to taxes. The IRS offers several credits and benefits that can help lighten the financial load in those early years.
Over the years, I've walked many new parents through these opportunities, and I always say: knowing what's available can make a real difference at tax time.
Child Tax Credit (CTC)
The Child Tax Credit is one of the biggest tax breaks for parents. For tax year 2024, you may be eligible for up to $2,000 per child under age 17, and up to $1,600 of that may be refundable if your income is low to moderate.
To qualify, your child must have a valid Social Security number and live with you for more than half the year. The half of year requirement is waived when born in tax year, meaning your child can be born in December and will meet the half of year requirement automatically. The credit begins to phase out for higher-income households, so your income level does matter.
I've had many clients surprised (in a good way) by how much this credit can reduce their tax bill, or even increase their refund.
Child and Dependent Care Credit
If you're paying for daycare, preschool, or a nanny so you can work (or look for work), you may qualify for the Child and Dependent Care Credit. This covers a percentage of what you spend on care for children under 13.
You can claim up to 35% of $3,000 of eligible expenses for one child, or up to $6,000 for two or more. I always tell parents: hang on to receipts and records from your provider, it makes claiming the credit much easier.
Earned Income Tax Credit (EITC)
For working parents with low to moderate income, the Earned Income Tax Credit can be a game-changer. If you qualify, it's a refundable credit, which means it can increase your refund, even if you don't owe taxes.
The amount depends on your income, filing status, and how many children you have, up to three children can qualify.
I've seen this credit make a huge difference for single parents or families in transition after welcoming a new child.
Final Thoughts
Having a baby changes everything, your sleep schedule, your grocery list, and yes, your tax return. But with the right guidance, it can also open the door to valuable tax credits and benefits that support your growing family.
Frequently Asked Questions
Q1: Can I claim the Child Tax Credit if my baby was born in December?
A: Yes. Even if your child was born late in the year, the IRS counts them as living with you for the full year. As long as your baby has a valid Social Security number and meets the other requirements, you can claim the Child Tax Credit for the year they were born.
Q2: How much is the Child Tax Credit for 2024?
A: For the 2024 tax year, you may receive up to $2,000 per qualifying child under age 17. Up to $1,600 of that may be refundable if your income is within the qualifying limits. Higher-income households may see the credit reduced due to phase-outs.
Q3: Can I claim child care expenses on my taxes?
A: Yes. If you pay for daycare, preschool, or a babysitter so you can work (or look for work), you may qualify for the Child and Dependent Care Credit. You can claim up to 35% of $3,000 in expenses for one child, or up to $6,000 for two or more children under age 13.
Q4: Do I qualify for the Earned Income Tax Credit with a new baby?
A: Possibly. The Earned Income Tax Credit (EITC) is available to working parents with low to moderate income. The amount depends on your income, filing status, and how many children you have. Adding a new baby may increase the credit you're eligible for.
Q5: What documents do I need to claim tax credits for my baby?
A: You'll need your child's Social Security number, proof of birth (like a birth certificate), and any records of child care expenses if you're claiming the Child and Dependent Care Credit. Keeping organized documentation makes filing much smoother.
