How Much Money Will I Get Back On Taxes After Having A Kid? It Could Be Pretty Substantial
With people scrambling to get taxes done or eagerly waiting to see how much money may be coming their way, you may find yourself with questions on how exactly taxes work or become different after having a child. And more specifically, you're probably wondering, "how much money will I get back on taxes after having a kid?"
Having a child isn't just a big change emotionally, but it impacts several other areas of your life that you may not expect. For example, having a baby is considered a "life event" when it comes to insurance, giving you the ability to switch up your benefits. It's marked as a "life event" on Facebook, which has no other benefit other than bragging rights. And, most importantly, having a kid also creates a whole new set of tax breaks for your family.
According to TurboTax, in order to receive tax benefits, you simply need your child's social security number to claim them as a dependent on your tax return. A social security card can be requested at the hospital when you're filling out information for the birth certificate. You'll also need to fill out a SS-5 form and provide proof of your child's age, identity, and citizenship in order to register with the Social Security Administration (SSA).
So once you've completed that process, how much money do you get back per child? According to H&R Block, a child tax credit is worth $1,000 for each qualifying child. However, it does get a bit tricky because the credit could be both nonrefundable and refundable, which means it depends how much you owe on taxes. TurboTax shared that receiving the refundable credit means that the credit must exceed your income tax liability for the year for the IRS to issue a refund check for the difference. So, you could end up with the $1,000 in hand or simply deducted off what you owe.
In order to qualify for the refundable or additional child tax credit, your child must be under the age of 17 at the end of the year and considered a U.S. citizen, national, or resident. And it's also important to note that a child tax credit does begin to phase out with higher income, and it goes away completely if income is over $110,000 on joint returns or above $75,000 on single/head of household returns, according to TurboTax.
To get the most out of your tax return, something else you should take into account is childcare costs because they can help you get even more money back. According to TurboTax:
If you pay for child care to allow you to work—and earn income for the IRS to tax—you can earn a credit worth between $600 and $1,050 if you're paying for the care of one child under age 13, or between $1,200 and $2,100 if you're paying for the care of two or more children under 13. The size of your credit depends on your income and how much you pay for care (you can count up to $3,000 for the care of one child and up to $6,000 for the care of two or more).
Additionally, for parents who are adopting, there are even more benefits to consider when it comes to your tax return. According to H&R Block and depending on income, if you paid adoption expenses last year, you might qualify for a credit of up to $13,460 for each child adopted under the age of 18 or disabled.
So when it comes to your tax returns and how much money you'll get back after having a kid, it's clearly not black and white. There are several factors such as childcare, adoption, income, and more to consider when figuring out exactly how much money you'll receive. As a general rule of thumb, however, the parent (or parents filing jointly) claiming a child gets a $1,000 child tax credit, whether it ends up in hand or not.