Even New Year’s Eve baby qualifies parents for child tax credit

December 31, 2018 : Annelise Wiens

While it may be the first baby of the new year who gets the headlines, the babies born during the final days of the year may pay off the most – at least when it comes to taxes. Catherine Martin, senior tax research analyst at The Tax Institute at H&R Block points out that even babies just minutes old as the clock strikes midnight on December 31 qualify their parents for the child tax credit, a tax benefit now worth up to $2,000 per qualifying child for 2018.

“Tax reform doubled the size of the child tax credit to $2,000, so the parents of New Year’s Eve babies are all the more lucky this year,” said Martin. “Not only did tax reform double the value of the credit, but it also opened up the credit for more families by raising the income limit for joint filers to $400,000.”

Child tax credit doubled in 2018

The maximum child tax credit (CTC) is $2,000 for each qualifying child under 17 in 2018. Up to $1,400 is refundable, which means taxpayers who do not owe taxes can still get the benefit if they have earned income over $2,500 in 2018.

“Even if the baby is born just minutes before 2018, the parents may still be able to get the full child tax credit for 2018,” said Martin. “This year, it’s not just new parents who will be claiming the bigger child tax credit. Many parents with kids under 17 but whose income has been too high for them to get the child tax credit in the past will be in the same boat as first-time parents, at least when it comes to filing their taxes.”

Earned income tax credit remains the same

Depending on their income and how many children they have, low-income workers may be eligible for the earned income tax credit (EITC) of about $500 to more than $6,000. The EITC, a valuable credit for millions of families, did not change under tax reform.

“Because eligibility for the EITC can fluctuate based on financial, marital and parental changes, you can be ineligible one year and eligible the next,” said Martin. “It is important to check each year if you qualify for the EITC. Just because you did not qualify last year does not mean you will not this year, especially if your family grew.”

Dependent exemption eliminated after 2017

The dependency exemption allowed taxpayers to reduce their taxable income by more than $4,000 for every dependent on their tax return. This benefit allowed a family of four to reduce their taxable income by more than $16,000.

While this benefit is eliminated for 2018, Martin suggests parents look at their entire financial picture before coming to any conclusions.

“Even though you won’t benefit from dependency exemptions for 2018, you might benefit from the larger child tax credit and a lower tax rate. It’s important to look at your specific situation to determine how you will be impacted,” said Martin.

Social Security numbers necessary for many tax benefits

Babies are not required to have Social Security numbers (SSNs), but SSNs are required for the EITC and will be required for the child tax credit for 2018.

Understanding how having children and other major life events impact taxes can help parents with their tax planning. For more information about tax breaks for parents, contact a local H&R Block tax professional. To find the nearest H&R Block office, visit www.hrblock.com or call 1-800-HRBLOCK.

Related Resources

Complicated earned income credit eligibility means 1 in 5 don’t claim the valuable tax credit

20% of eligible taxpayers do not claim the earned income tax credit. This may be due to the misunderstanding of the EITC eligibility requirements.

Annelise Wiens

Annelise Wiens

Editor and Producer

As the newsroom editor, Annelise Wiens is interested in more than just tax and industry news, but the stories of H&R Block's 80,000 associates, their communities and H&R Block's world headquarters in Kansas City, Missouri. Wiens joined H&R Block in 2014 from a public relations agency, where she worked with clients in the financial services industry. Before that, she worked as a communicator for a senior member of the United States House of Representatives. She graduated from Biola University in La Mirada, CA with a bachelor's degree in history.

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