Need to Know Tax Tips for New Parents

Becoming a parent is a life-changing event, filled with joy, challenges, and new responsibilities. One of those responsibilities involves understanding how your new addition can affect your taxes. Whether you’ve welcomed a newborn or adopted a child, there are several tax benefits and considerations that can help lighten the financial load of parenting. Here’s a guide to the key credits, deductions, and general tax tips for parents navigating their new financial reality.

Need to Know Tax Tips for New Parents | CowderyTax.com #taxes

Types of Tax Breaks Available to Parents

Parents can access various tax breaks, including credits and deductions, to help reduce their tax liability. Tax credits, such as the Child Tax Credit and the Earned Income Tax Credit, directly reduce the amount of taxes owed and can sometimes result in a refund.

On the other hand, deductions like the Dependent Care Credit lower your taxable income, which can reduce the overall tax owed.

The key difference between these tax breaks lies in how they impact your taxes. Credits provide a dollar-for-dollar reduction in your tax bill, making them especially valuable. Deductions, while still beneficial, only reduce the income subject to taxation and are less direct in their financial impact. Understanding these distinctions can help parents maximize their tax savings.

10 Tax Tips for Parents with Newborn or Newly Adopted Children

There are several strategies that parents can use to reduce their overall tax liability through credits and deductions. This list provides an overview of available tax tips for parents.

1) Claiming Your Child as a Dependent

The first step in receiving tax benefits for your child is claiming them as a dependent. For tax purposes, a dependent child must:

  • Be your biological child, stepchild, adopted child, or eligible foster child*.
  • Be under age 19 (or under age 24 if a full-time student).
  • Not provide more than half of their own financial support.

Ensure you have your child’s Social Security Number (SSN) or Adoption Taxpayer Identification Number (ATIN) to claim them as a dependent. You’ll need this information when filing your taxes.

*Note: Not all foster children can be claimed as dependents by the fostering family. Check with your state agency or a tax professional.

2) Child Tax Credit (CTC)

The Child Tax Credit is a significant tax benefit for parents. Here’s what you need to know:

  • Credit Amount: Eligible parents can claim up to $2,000 per qualifying child under the age of 17.
  • Refundable Portion: Up to $1,700 of the credit may be refundable, meaning you could receive this amount even if you owe no taxes.
  • Income Limits: The credit begins to phase out for single filers earning more than $200,000 and married couples filing jointly earning more than $400,000.

This credit can reduce your tax liability and potentially increase your refund.

3) Dependent Care Credit

If you pay for childcare so you can work or look for work, you may qualify for the Dependent Care Credit. This credit covers a percentage of childcare expenses, including daycare, babysitters, or after-school programs.

  • Eligible Expenses: You can claim up to $3,000 for one child or $6,000 for two or more children.
  • Credit Amount: Depending on your income, you can receive a credit of 20% to 35% of your childcare expenses.
  • Receipts and Records: Ensure you keep receipts and records of payments to claim this credit.

4) Adoption Tax Credit

For families who have adopted a child, the IRS offers a substantial adoption tax credit to help offset adoption costs:

  • Maximum Credit: Up to $16,810 in qualified expenses for 2024. (adjusted annually for inflation).
  • Eligible Expenses: Include adoption fees, court costs, attorney fees, and travel expenses.
  • Phase-Out Income: The credit phases out for families with modified adjusted gross incomes (MAGIs) between  $252,151 and $292,150.

Note: This credit is non-refundable, meaning it can reduce your tax liability but won’t result in a refund if the credit exceeds your taxes owed.

5) Earned Income Tax Credit (EITC)

The Earned Income Tax Credit is a refundable credit designed to assist low-to-moderate-income families. The credit amount increases if you have children:

  • Eligibility: The income limits and credit amounts vary based on the number of children and filing status.
  • Credit Amounts: For tax year 2024, families with one child can receive up to $4,213, and $6,960 for two children while families with three or more children can receive up to $7,830.

Even if you don’t owe taxes, you may qualify for this refundable credit, so don’t overlook it.

6) Adjusting Your Withholding

With the arrival of a new child, you may want to adjust your tax withholding. Updating your W-4 form to reflect the additional dependent can help ensure you don’t overpay or underpay your taxes throughout the year. Use the IRS Withholding Calculator or consult a tax professional to determine the best adjustments for your situation.

7) Keep Organized Records

Maintaining organized financial and tax records is essential when claiming credits and deductions related to your child. Some tips include:

  • Save all receipts for childcare expenses, medical costs, and adoption-related expenses.
  • Keep copies of your child’s birth certificate or adoption decree.
  • Store all tax forms, such as W-2s, 1099s, and receipts, in a secure and accessible location.

8) State-Level Tax Benefits

Many states offer additional tax benefits for parents, such as state-level child tax credits, childcare credits, or deductions for adoption expenses. Check your state’s tax website or consult a tax professional to explore these opportunities.

9) Education Savings Plans

Starting an education savings plan, such as a 529 Plan, early in your child’s life can provide significant tax advantages. Contributions to these plans grow tax-free, and withdrawals are also tax-free when used for qualifying education expenses, including tuition, books, and certain room and board costs. Many states also offer tax deductions or credits for contributions to a 529 Plan. Consider setting up a plan to build a strong financial foundation for your child’s future education.

10) Consult a Tax Professional

While these tax benefits can provide significant financial relief, the rules can be complex. Consulting with a tax professional can help ensure you take full advantage of the credits and deductions available while avoiding common filing mistakes.

At Cowdery Tax Pros, we specialize in helping families navigate the tax benefits associated with growing their family. Whether you have questions about claiming credits, adjusting withholdings, or organizing your records, our friendly team is here to help. Contact us today to schedule a consultation and take the stress out of tax season.


Welcoming a new child into your family is an exciting and rewarding experience, and the tax benefits available can help ease some of the financial burdens. From the Child Tax Credit to the Adoption Tax Credit, understanding these opportunities can make a big difference in your tax return. By staying informed, keeping accurate records, and seeking professional advice when needed, you can focus on what truly matters—enjoying time with your growing family.

This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.