Parents have special tax situations and benefits. Tax breaks for parenting expenses can result in a lower tax bill and a higher refund. Here are some key things new parents need to know.
Before filing, new parents should:
* Get the child a Social Security or Individual Tax Identification number.
To claim parental tax breaks, the taxpayer must have their child’s or dependent's Social Security number, Adoption Tax Identification Number or Individual Tax Identification Number. Confirming a child's birth is the only way the IRS can verify that the parent is eligible for the credits and deductions they claim on their tax return.
* Check withholding
A new family member might make taxpayers eligible for new credits and deductions, which can greatly change their tax liability. They can use the IRS Tax Withholding Estimator to check their withholding. Taxpayers should provide their employer with an updated Form W-4, Employee's Withholding Certificate, if they want to change how much tax is withheld from their paycheck.
When preparing to file, check tax credits and deductions:
* Child Tax Credit
Taxpayers who claim at least one child as their dependent on their tax return may be eligible for the child tax credit. for help figuring out if a child qualifies for this credit, taxpayers can check Does my child/dependent qualify for the child tax credit or the credit for other dependents?
* Child and Dependent Care Credit
If taxpayers paid someone to take care of their children or another member of their household while they work, they may qualify for the Child and dependent care credit regardless of their income. Taxpayers who pay for daycare expenses may be eligible to claim up to 35% of those expenses with certain limits.
* Adoption Tax Credit
This credit lets families who are in the adoption process during the tax-year claim eligible adoption expenses for each eligible child. Taxpayers can apply the Adoption tax credit to international, domestic, private and public foster care adoptions.
* Earned Income Tax Credit
The Earned Income Tax Credit helps low- to moderate-income families get a tax break. If they qualify, taxpayers can use the credit to reduce the taxes they owe – and maybe increase their tax refund. People who earned $63,398 or less in 2023 may be eligible for this valuable tax credit. For tax year 2023, the EITC is as much as $7,430 for a family with three or more children or $600 for taxpayers who don’t have a qualifying child.
* Credit for Other Dependents
Taxpayers with dependents who don't qualify for the child tax credit may be able to claim the credit for other dependents. taxpayers can use the Does my child/dependent qualify for the child tax credit or the credit for other dependents? tool on IRS.gov to help determine if they are eligible to claim the credit. They can claim this credit in addition to the child and dependent care credit and the Earned Income Credit.