Can You Claim a Newborn on Your Taxes?
Having a baby changes everything—including your taxes. Here's what new parents need know when getting your paperwork together for tax season.
Taxes are never fun. Even if you expect a refund, the tedious process of actually going item by item is enough to make anyone want to procrastinate until mere hours before the filing deadline, which has been extended to July 15 this year because of the coronavirus. But if you started a family in 2019? Not only do you have plenty of other priorities on your plate, you may be confused about how your tax situation will change.
You're in luck though, even if your baby was born on December 31 at 11:59 p.m., you can claim that newborn on your taxes.
"To claim a newborn as a dependent in a tax year, the baby must be born on or before the last day of the year and must have a valid Social Security number by the time the return is filed," explains Earl Knecht, CFP, vice president and chief financial officer of Napa Valley Wealth Management. "If the parents are married and living together, the child must live in the home to be claimed as a dependent. If the parents are not married but live together, the parent who financially supports the child more than half of the time can claim the child as a dependent. If the parents live apart, the parent whose home the child resides in more than half of the time is the one that can exercise the claim."
Prior to the 2018 tax year, parents got exemptions for each dependent—a dollar amount that was subtracted from your adjusted gross income or taxable income. Starting in 2018, the dependent exemption was replaced by the Child Tax Credit.
For tax year 2019, which is filed in 2020, parents can receive up to $2,000 credit for each qualifying child. A credit is a dollar-for-dollar reduction in the taxes you owe. To qualify, children must be under 17, you must have provided at least half the support for the child throughout the calendar year, the child cannot be claimed on anyone else's taxes, and you must have an income of less than $200,000 for single filers and $400,000 if married filing jointly.
The Child Tax Credit is a great way to knock your tax bill down and there's no limit to the number of children you can claim as long as they all meet the requirements for the credit.