4 Things to Know About Your Taxes If You Had a Baby Last Year
So, 2018 was kind of major: It’s the year you became a mom. But now, with the tax deadline in the near future (not to mention some tax changes), you still have a gazillion questions about newborn-related write-offs you can take before you file. We checked in with Lisa Greene-Lewis, TurboTax expert and CPA, to find out the top four things you need to know if you had a baby this year.
Kids No Longer Count As a Dependent Exemption...But You Do Get an Increased Credit
It’s official: Your new baby qualifies as a dependent. But under the new tax law for 2018, the dependent exemption has been eliminated. Whether this is good news or bad news depends on your tax bracket and the age of your children. Here’s why: While the dependent exemption (the ability to count your kids as a dependent to the tune of $4,050 per head) went away, the child tax credit doubled (it’s now $2,000 versus $1,000).
Since the child tax credit is a dollar for dollar reduction of taxes, that's helpful. (The dependent exemption, on the other hand, used to come off your income, but then that income was taxed at a certain rate.) But it's worth noting that in order to claim it in full, you need to make less than $400,000 if you file jointly. Another potential bummer is that while you used to be able to claim children ages 17 to 24 as a dependent, you'll no longer get a tax break for anybody over 17.
You Can Still Claim the Earned Income Tax Credit
For background, this was established to help low- or moderate-income families offset the burden of social security taxes and provide an incentive to work. Qualification depends on a few things: The child has to live with you for more than half the year, he can't be claimed by any other taxpayer—although exceptions apply for divorced or separated parents—and the household income must be less than $46,010 if you're married and filing jointly with one kid. (Eligibility and income levels increase the more kids you have.) If you have one child, the maximum amount you can get back is $3,461. If you have two kids, it's $5,716. And for three or more kids, the credit tops out at $6,431. (More details about the Earned Income Tax Credit and how to claim it can be found here.)
You Can Write Off a Portion of Your Childcare
Great news: If you’re working (or actively seeking work) and you pay childcare for a dependent under 13 years old, you can claim the Child and Dependent Care Credit. This credit is a dollar-for-dollar reduction of your taxes, based on your childcare expenses. You can get up to $1,050 for one child and up to $2,100 for two children or more. (Nursery school, private kindergarten, after-school programs, summer day camps and day care are all qualifying expenses.) Already pay for childcare out of a pretax FSA? You can't double dip, but you can claim the credit on up to $1,000 if you have two or more kids, assuming you've maxed out the $5,000 FSA contribution.
…And the Cost of Any Onesies You Donate
News flash: Babies outgrow their clothes fast. Pass the ones in good condition on to a charity that accepts clothing donations and bump up the charitable deduction on your taxes.