Have you added a new baby to your family in the last year? If so, this will affect your taxes when you file this year.
The IRS knows there are a lot of expenses that come with having or adopting a baby, and thus provides some extra tax breaks for parents in Union City, NJ who are filing taxes with a newborn baby. Here’s a look at some of the steps you should take before beginning your taxes this year to make sure you’re getting the most money back possible to account for your new baby:
- Get your child a Social Security number: Typically, while you are in the hospital, you will fill out paperwork to apply for a Social Security number for your child. You will then receive that documentation, including your child’s Social Security card, several weeks after you return home. If for whatever reason you did not go through this process at the hospital, or if your baby wasn’t born in the hospital, you’ll need to make sure you fill out Form SS-5 and get your child a Social Security number before you proceed.
- Take the federal child tax credit: Families are able to deduct up to $2,000 from their federal income taxes for every qualifying dependent under the age of 17. Because these are tax credits, that means they directly lower your tax bill (or increase your return), rather than reducing your taxable income. So, if you owed $10,000 and have one child, your liability would go down to $8,000. However, those credits start to phase out if you made $200,000 as an individual or $400,000 as a married couple filing jointly.
- Choose the right filing status: The filing status you choose could have an impact on how much you’re able to get off your taxes for young children. The standard deduction for a single parent filing as a head of household gets you a larger tax break than just the standard individual tax break. If you’re married, filing jointly will likely be your best bet.
- Track medical expenses: If you’re itemizing, you should be sure to put your medical expenses into your tax return. You can deduct total out-of-pocket costs of qualified medical expenses for the year that are greater than 7.5 percent of your adjusted gross income—your total gross income minus any student loan payments or contributions to IRS and HSAs.
- Childcare expenses are deductible: Parents often forget to claim childcare expenses on their taxes, but these costs are deductible, whether you use a childcare or daycare service or have someone come too your home to work as a nanny or babysitter.
- Open a 529 college savings plan: 529 college savings plans can help you get some tax breaks. Deductions are available for parents who contribute to these plans. You don’t have to contribute a ton!
For more information about some of the steps you should take when filing your taxes for the first time with a new baby, contact Kedean’s Generation today. We’ll be happy to tell you more about taxes and newborns in Union City, NJ.
Categorised in: Tax Preparation