Having a child can bring a lot of joy and love into your life but it can also bring a lot of changes to your finances including taxes. Heres how your taxes will change after you have a kid:
- Child Tax Credit: You may be eligible for a Child Tax Credit of up to $2,000 per child under the age of 17. This credit can be used to offset any federal income tax you owe and may even result in a refund if the credit is greater than the tax you owe.
- Dependent Exemption: You can also claim a dependent exemption for each of your children. This can reduce your taxable income by $4,050 per child in 2021. However, this provision is no longer available starting on tax year 2018, due to the Tax Cuts and Jobs Act of 2017.
- Child and Dependent Care Credit: If you pay for child care or dependent care so you can work or look for work, you may qualify for a credit of up to 35% of your expenses, up to a certain amount.
- Earned Income Tax Credit (EITC): If you have a low or moderate income, you may qualify for the EITC. The credit can be worth up to $6,728 for families with one child, and more for families with more children.
- Adoption Credit: If you adopt a child, you may be eligible for a credit of up to $14,440 for the expenses related to the adoption.
It is important to note that these tax benefits are subject to certain income limits and other qualifications, so it’s a good idea to consult with a tax professional or use tax software to determine your eligibility and the amount of any credit or exemption you can claim.
In summary, having a child can bring many tax benefits, but be sure to consult with a tax professional or use tax software to determine your eligibility and the amount of any credit or exemption you can claim.