Most new parents think about baby blankets, names, toys and other fun things, but many forget to think about how their new child will impact their tax situation. With another human being in your household, you will be eligible for a whole new set of deductions and tax breaks. Here are some of the top tax tips for new parents who are looking for tax help:
- Make sure you get your new baby a social security number, since this enables your child to be claimed as a legal dependent. This also means your child can get proper medical coverage, and you can apply for government services that benefit your child. Make sure you do this when your baby is born. The hospital will usually ask if you want to do this — and you should make sure to stop and do it, rather than putting it off.
- If you and your partner don’t file jointly, only one of you can claim your child as a dependent. If you both claim your child, you may end up needing IRS audit help from a tax attorney.
- Change your withholding status so that you reduce the amount of money withheld. Since you are claiming an additional dependent, you don’t need to withhold as much money for tax purposes. To do this, simply file a new W-4 with your employer.
- Set up an Educations Savings Account or a 529. This will enable you to start saving money, now, for your child’s future college plans. It’s never too early to start saving, and there’s always an excuse to put it off — so bite the bullet and start now.