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2.29.2024

Tax Tips for New Parents

This article was adapted from the Internal Revenue Service (IRS) Tax Tip 2023-89 (July 10, 2023). Additional content has been added under each tip to provide additional details. All information and content was retrieved from IRS.gov.

Kids are expensive. Whether someone just brought home a bundle of joy from the hospital, adopted a teen from foster care, or is raising their grandchild, there are several tax breaks that can help.

Here are some tax tips for new parents

• Get the child a Social Security or Individual Tax Identification numberTo claim parental tax breaks, the taxpayer must have their child 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.

Getting a Social Security Number for the First Time: You can apply online, then go to a local Social Security office to provide your documentation. Once your application is approved, you’ll receive a Social Security card with your number on it by mail within 14 days. For more information, or to apply, click on the link above.

To find a Social Security Administration Office near you, visit: https://secure.ssa.gov/ICON/main.jsp to search by zip code.

Adoption Tax Identification Number (ATIN): An ATIN is an Adoption Taxpayer Identification Number issued by the Internal Revenue Service as a temporary taxpayer identification number for the child in a domestic adoption where the adopting taxpayers do not have and/or are unable to obtain the child's Social Security Number (SSN). The ATIN is to be used by the adopting taxpayers on their federal income tax return to identify the child while final domestic adoption is pending. For more information, click on the link above.

Individual Tax Identification Number: An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security number  from the Social Security Administration.
 

• Check withholdingA new family member might make taxpayers eligible for new credits and deductions, which can greatly change their tax liability. They can use the IRS 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.

Check eligibility for these tax credits and deductions

• Child Tax CreditTaxpayers 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? The tool, which takes about 10 minutes to complete, is designed for taxpayers who were U.S. citizens or resident aliens for the entire tax year for which they're inquiring. If married, the spouse must also have been a U.S. citizen or resident alien for the entire tax year.
   
• Child and Dependent Care CreditIf 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 their daycare expenses with certain limits.

The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals). Expenses paid for the care of a qualifying individual are eligible expenses if the primary reason for paying the expense is to assure the individual's well-being and protection. If you received dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar limit that applies to you.
 

• Adoption Tax CreditThis 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 credit to international, domestic, private and public foster care adoptions.
   
• Earned Income Tax CreditThe 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.

To qualify for the Earned Income Tax Credit you must:

• Have worked and earned income under $63,398
• Have investment income below $11,000 in the current tax year
• Have a valid Social Security number by the due date of your current return
• Be a U.S. citizen or resident alien all year
• Not file Form 2555, Foreign Earned Income
• Meet certain rules if you are separated from your spouse and not filing a joint tax return

There are also special qualifying rules for military members, clergy members, and taxpayers and their relatives with disabilities. To see if you qualify, use the EITC Assistant calculator.
 

• 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.

Resource:

IRS Volunteer Income Tax Assistance (VITA) programs offer free tax help for taxpayers who qualify. To find a provider near you, visit irs.treasury.gov/freetaxprep/. 

First 5 Nevada does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. Please consult a licensed tax professional for additional information and assistance.