The arrival of your baby is an exciting and wonderful event. The arrival of the bills that come with your new baby? Not so wonderful. Here’s some good news: your baby also comes with a bouncing new tax deduction. You may also be eligible for certain tax credits. You can start taking advantage of these tax breaks by changing withholdings at work, which should take a bite out of taxes withheld from your paycheck.
The W-4 Form
The new arrival means you need to file a new W-4 form at work. The amount of payroll taxes withheld from your paycheck depends on your marital status and the number of withholding allowances you claimed when you were hired. Ask your employer for a blank W-4 Form. According to the Internal Revenue Service, you should give your employer a new W-4 within 10 days of the birth. It’s not a good idea to add just one allowance to the number you already claim. Go ahead and fill out the worksheets that come with the W-4 form to be sure you claim the right number of withholding allowances.
Child Tax Credit
You may be eligible for the Child Tax Credit, depending on your income and the number of children you have. If your total household income will be less than $90,000, or $61,000 for a single parent, add two withholding allowances per child. However, if you have three to seven children, subtract one of the allowances. If you have eight or more children, subtract two allowances. If your expected income is between $90,000 and $119,000, add one withholding allowance per child. For single parents, the limits are $61,000 to $84,000. You're not eligible if your total household income goes over $119,000 or $84,000 for a single parent.
Child Care Tax Credit
If you expect to spend $1,900 or more on child care expenses by the end of the year, you may qualify for the Child and Dependent Care Tax Credit. It's only allowed if you had to pay for child care while you and your spouse worked or looked for a job, or if one of you is a full-time student or disabled. The person cared for must be a child no older than 12, or a disabled dependent. You can claim one withholding allowance if you have one child and two allowances if you have two or more children.
Use the worksheets on the W-4 to determine your correct number of withholding allowances. Enter the information on lines A to G on the first page of the W-4. Put the total on line H. Enter your name, Social Security number and filing status on lines 1 to 3. Check line 4 if your last name doesn’t match the name on your Social Security card. Transfer the total number of withholding allowances on line H to line 5. Use lines 6 and 7 to make adjustments to the amount of tax you want withheld.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.