Pregnancy is an exciting but expensive time. As your bump grows bigger and your time grows shorter, you'll have limited time to get a crib, changing table, highchair, diapers, formula and all the other supplies you'll need when the baby comes. You can adjust your tax withholding to help you grab a little extra cash while you're making your preparations. You can also deduct some of your pregnancy-related medical expenses. After the baby arrives, you may want to change your filing status and look into the child tax and child care credits offered by the IRS.
Adjust Your Withholding
When you started your job, your employer asked you to fill out a W-4. On this form, you calculated how much federal income tax you wanted the payroll department to withhold from your check each pay period. This form stays on file with your employer, and you can change it at any time. To get more money, you can simply claim more dependents on your new form. Tread carefully when making this adjustment, however. If you don't have your boss withhold enough tax, you'll owe at the end of the year and pay a penalty if you owe more than the IRS thinks you should.
Take Medical Deductions
Getting good prenatal care means you'll have lots of doctor appointments during your pregnancy. You can't deduct the cost of your health insurance premiums or any medical bills your insurance pays. You can, however, deduct any medical expenses you paid for yourself that exceed 7.5 percent of your adjusted gross income in 2018. In 2019, the law will change and medical expenses will be deductible only when they exceed 10 percent of your adjusted gross income. Not only can you deduct the care costs you pay, you can also deduct the expenses related to receiving treatment. You may deduct travel expenses, lodging and meals if they were purchased as part of a trip you took specifically to see a certain doctor or receive a certain medical treatment.
File Head of Household
After your baby is born, the IRS may allow you to use the head of household filing status. This status generally results in a lower tax liability than filing as single. In order to qualify for this filing status, the IRS requires you to be single on the last day of the tax year. You must also pay more than half of the expenses required to maintain your household and have a qualifying dependent. In this case, that dependent is your new bundle of joy. In order for your new baby to qualify, he must live with you for more than half of the year. If the baby lives with his father for six months, the IRS won't consider him a qualifying child and may prevent you from filing as the head of your household.
Claim Tax Credits
The birth of your child may qualify you for two tax credits offered by the IRS. The first is the child tax credit. If your baby lives with you for more than six months out of the year, you may receive a credit of up to $1,000 on your taxes. The credit cannot exceed the amount of tax you owe, however, so it could be less. In order to be eligible for the credit, your adjusted gross income must be less than $110,000 if you file as married filing jointly, $75,000 if you're filing as single or head of household and $55,000 if you're married but filing separately.
The IRS also gives taxpayers a child care credit. This credit provides up to $3,000 per child to cover the cost of child care you paid upon returning to work after your maternity leave or while actively searching for a new job. The credit gets calculated as a percentage of the child care costs you paid. The percentage you may deduct varies based on the amount of your adjusted gross income and ranges from 20 to 35 percent.
- Investopedia: Understanding the U.S. Tax Withholding System
- Intuit TurboTax: Can I Claim Medical Expenses on My Taxes?
- IRS: Publication 502 – Medical and Dental Expenses
- eFile.com: IRS Head of Household Filing Status
- eFile.com: How to Claim a Qualifying Child as a Dependent for Tax Deductions
- IRS: Publication 972 – Child Tax Credit
- IRS: Topic Number 602 - Child and Dependent Care Credit
- IRS: Publication 503 (2017) – Child and Dependent Care Expenses
- First Time Baby Tax Credit
- How Much Money Do You Get Back Out of Your Child Care Expenses on Your Taxes?
- Why Do Some People Get More in Tax Returns Than They Pay Into It?
- Do We Need to Give Our Babysitter a 1099 Tax Form?
- Can You Receive a Tax Credit if You Do Not Pay Taxes?
- How Should Married Couples Fill Out a W-4?
- Can You Get More Money Back on IRS Taxes Than You Paid In?
- How Much Will Having a Baby Affect Tax Liability?