If your newborn child was born before Dec. 31, you should include him on your income tax return for that year. Newborns can dramatically reduce your tax liability, especially if you are able to claim the Child Tax Credit. These income tax benefits are designed to provide parents with the resources necessary to support their newborns financially. Althiygh it is fairly straightforward to include a newborn on your taxes, you may benefit from contacting a qualified tax preparing professional or tax attorney to ensure that you are gaining the greatest tax benefit available to you.
Obtain IRS Form 1040 or 1040A. You may not use form 1040EZ as this form does not permit you to claim dependents.
Check the box next to the appropriate filing status. If you are married, the addition of your newborn will not change your filing status. However, if you are single, your newborn may qualify you to file as Head of Household, which will allow you to claim a larger standard deduction.
Write the newborn's first and last name, Social Security number and relationship to you--for instance son, daughter or grandson on Line 6c on Form 1040 or 1040A. You may only claim the newborn as a dependent if you are the child's legal guardian.
Include any other children or dependents on the additional boxes on Line 6c if applicable. For every qualifying dependent including your newborn, you are entitled to deduct a flat amount from your taxable earnings. For the 2009 tax year, each dependent reduced taxable income by $3,650.
Check the box after any dependent that qualifies you to claim the Child Tax Credit. This is a $1,000 credit to your income taxes that lowers your tax liability by that amount. If you owe less than $1,000 in income taxes, you may even qualify for a refund of the difference between the Child Tax Credit and your tax liability. The credit is available only to taxpayers who earn under a certain threshold, which in 2009 was $110,000 on joint returns and $75,000 on single returns.
Consult the instructions associated with your tax form to see if you qualify for any other deductions or credits associated with your newborn. For instance, you may qualify for the Child Care Credit if you pay for child care, the Adoption Credit if your newborn is adopted or the Earned Income Tax Credit.
Consult a professional tax preparer or tax attorney if you have any questions about the deductions or credits available to parents. It may be wise to pay a tax preparer to fill out your first return after becoming a parent to ensure that all of the deductions or credits available to you are claimed.
A dependent may be claimed only on one tax return. If you and a spouse file separately, or if you are not married to the newborn's other parent, only one of you may claim the newborn on your tax return.