Tax Tips Tuesday: Last baby of the year
Baby Steps for New Parents with Tax Questions: Claiming eligible credits helps families reduce tax bills
By The Tax Institute At H&R Block
All babies born in 2013 – even at 11:59 p.m. on Dec. 31 – can be claimed by their parents as a dependent and used to qualify for many other child-related tax benefits for tax year 2013.
With tax law changing every year, even parents who are not having their first baby can benefit from professional guidance on the tax breaks they qualify to claim. The tax implications resulting from having a child extend far beyond claiming a dependent. Understanding how having children and other major life events impact taxes can help parents make the most of tax planning.
Individual tax situations vary, but the following information can help first-time parents begin to understand some basics of their new tax situation.
Child Tax Credit
The maximum Child Tax Credit is $1,000 (based on income and filing status) for each qualifying child under 17. Because this can be a refundable tax credit, even taxpayers who do not owe taxes are eligible if they have earned income over $3,000 in 2013.
Earned Income Tax Credit
Low-income workers may be eligible for the Earned Income Tax Credit (maximum credit of $487 to $6,044) based on the number of children they have and if their income is below these requirements:
- Single with no qualifying children – $14,340 ($19,680 married filing jointly)
- Single with one qualifying child – $37,870 ($43,210 married filing jointly)
- Single with two qualifying children – $43,038 ($48,378 married filing jointly)
- Single with three or more qualifying children – $46,227 ($51,567 married filing jointly).
The $3,900 qualifying child exemption allows taxpayers to claim a dependent exemption for their child, stepchild, adopted child, eligible foster child, sibling or stepsibling, or a descendant of one of these. Qualifying children generally must:
- Be under age 19 or under age 24 and a full-time student, and younger than the taxpayer, or any age if permanently and totally disabled
- Live with the taxpayer for more than half the year (exceptions for birth, death and temporary absences)
- Not file a joint tax return for the year, unless the return was filed only to claim a refund of taxes withheld, and neither spouse would have a tax liability if separate returns were filed
- Be a U.S. citizen, U.S. national, or resident of the U.S., Canada or Mexico
- Not provide more than 50 percent of their support for the year.
Additionally, a taxpayer who has a qualifying child may be eligible for other tax benefits, such as the Child and Dependent Care Credit and head of household filing status.
Social Security number
Most kids won’t get a job until they are in high school, but their parents may have applied for their Social Security number when applying for their birth certificates.
Babies are not required to have Social Security numbers, but without them they cannot be claimed as dependents on tax returns. Social Security numbers also are required when parents do the following things for their children: open a bank account, buy savings bonds, obtain medical coverage and apply for government services.