Tax Day Is Almost Here: Everything You Need To Know About The New Child Tax Credit
It’s a sizable amount.
Filing taxes may not be the first thing that springs to mind when you bring home a new baby, but it's a milestone like any other. So what is the 2020 Child Tax Credit if you had a baby between January 1 and December 31 in 2020? Tax laws about new babies have changed in recent years, so check this out even if you already have some older children on the books.
What is the Child Tax Credit?
"The Child Tax Credit is the credit that you get for having a dependent under the age of 17," explains Lisa Greene-Lewis, CPA and tax expert for TurboTax, adding that it's worth $2,000 per child when filing your 2020 taxes. This includes newborns as well. "The cool part about these credits is that up to $1,400 of it is refundable, meaning you can reduce your taxes to zero and then even get a tax refund of up to $1,400 per child," Barbara Schreihans, a Certified Tax Strategist and owner of Your Tax Coach, tells Romper. Yep, your child is helping to save a little cash before they've even started speaking.
How do I qualify for the Child Tax Credit?
In order to qualify for the Child Tax Credit, you should be able to claim your child as a dependent and provide over half of their care, as Greene-Lewis further explains. In addition, the child must qualify as a U.S. citizen, U.S national, or U.S. resident alien.
There are some income requirements as well. "To qualify for the credit, your modified adjusted gross income must be less than $400,000 if filing jointly as a married couple or less than $200,000 for everyone else," explains Schreihans.
How can new parents claim their baby as a dependent?
For parents who had a baby in the year 2020, you will need your baby’s social security number to qualify for the Child Tax Credit. It’s often among the paperwork (along with the birth certificate) you filled out right after your baby was born if you delivered at the hospital. If you haven’t filled out his paperwork yet, contact your county to find out what steps you need to take to obtain your child’s social security number.
You may also be entitled to additional stimulus money as a new parent. When the IRS issued the stimulus payments in 2020, they went by a person's previous tax filing (for 2018 or 2019), explains Greene-Lewis. If you had a baby in 2020, there's no way the IRS could have known you have an additional dependent in your household. In this case, "you would be able to claim the additional stimulus payments for your baby that you had in 2020," says Greene-Lewis. For the most part, families who welcomed a new baby in 2020 can get some pretty sweet tax benefits for that trying and unusual year.
What If I Need More Time?
If the May 17 deadline is too soon, then consider using the Free File form tax extension, which gives you until October 15, 2021 to file your 2020 taxes, according to the IRS. You will need to provide an estimate of your tax liability beforehand. By using the Free File tax extension, or asking your accountant to file Form 4868, you’ll get a few more months to get all your tax info together.
How Do I File Taxes This Year?
Due to staffing issues at this time, the IRS encourages individuals to file electronically. Anyone whose adjusted gross income is $72,000 or less is eligible to use the IRS software Free File for their taxes this year. For additional guidance, use software such as TurboTax or H&R Block, which offer additional help from tax professionals. There’s always the option of hiring a tax pro and letting them handle everything, too.
Trying to file your taxes after adding another person to the family can be tricky, but there are plenty of resources available to help make the process a little easier. And for the most part, your new baby will only act as a tax benefit, which is good news to parents with a 2020 baby.
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