Even Babies Born on New Year’s Eve Qualify Parents for Child Tax Credit

December 15, 2015 : H&R Block

With the estimated, average cost for raising a child exceeding $245,000, parents need to take every opportunity to save money. Keeping that in mind, 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. H&R Block tax experts point out that even babies just minutes old as the clock strikes midnight on December 31 qualify their parents for the Child Tax Credit. Individual tax situations vary, but the following information can help first-time parents begin to understand some basics of their new tax situation.

Child Tax Credit

The maximum Child Tax Credit is $1,000 (based on income and filing status) for each qualifying child under 17. Because this tax credit can be refundable, even taxpayers who do not owe taxes are eligible if they have earned income over $3,000 in 2015.

Earned Income Tax Credit

Low-income workers may be eligible for the Earned Income Tax Credit based on the number of children they have and if their income is below these requirements:

  • No qualifying children – $14,820 unmarried/$20,330 married filing jointly
  • One qualifying child – $39,131 unmarried/$44,651 married filing jointly
  • Two qualifying children – $44,454 unmarried/$49,974 married filing jointly
  • Three or more qualifying children – $47,747 unmarried/$53,267 married filing jointly.

Dependency exemption

The $4,000 exemption for a qualifying child allows taxpayers to claim a dependency exemption for their child, stepchild, adopted child, eligible foster child, sibling or stepsibling, or a descendant of one of these. Qualifying children generally must:

  • Be under age 19 or under age 24 and a full-time student, and younger than the taxpayer, or any age if permanently and totally disabled
  • Live with the taxpayer for more than half the year (exceptions for birth, death and temporary absences)
  • If married, not file a joint tax return for the year, unless the return was filed only to claim a refund of taxes withheld, and neither spouse would have a tax liability if separate returns were filed
  • Be a U.S. citizen, U.S. national, or resident of the U.S., Canada or Mexico
  • Not provide more than 50 percent of their own support for the year.

Additionally, a taxpayer who has a qualifying child may be eligible for other tax benefits, such as the Child and Dependent Care Credit and head of household filing status.

Social Security number

Most kids won’t get a job until they are in high school, but their parents may have applied for their Social Security number when they applied for their birth certificates.

Babies are not required to have Social Security numbers, but without them they cannot be claimed as dependents on tax returns. Social Security numbers also are required when parents do the following things for their children: open a bank account, buy savings bonds, obtain medical coverage and apply for government services.

The tax implications resulting from having a child extend far beyond the tax breaks mentioned here. 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 800-HRBLOCK.

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