Tax Benefits For NewBorns
Parenting are often expensive with tons of latest expenses getting added up to your list. Baby supplies, baby bottles, diapers, baby clothing, etc. can end up to be quite expensive. However, if you’re a parent to a newborn child then ready to ” you’ll be able to avail certain tax advantages. These can help reduce the financial burden up to a particular extent.
Let us inspect the tax benefits which will be availed for your newborn kid
Tax Credit for Children
If your child is under the age of 17, you can claim him as a dependent and benefit from the Child Tax Credit (CTC). The Tax Credit is worth up to $2,000 for each qualifying child.
If you are a single parent, the CTC value is reduced by 5% of your AGI that is greater than $200, 00, and it is reduced by 5% of your AGI that is greater than $400, 00.
if you are married and file your taxes jointly.
CTC is partially refunded, which means that if the credit value exceeds the total amount of taxes owed, you may be eligible for a tax refund of up to $1400 of the remaining amount. This portion of the credit would be known as the Additional Tax Credit.
Tax Credit for Adoption
You would be eligible for the Adoption Tax Credit if you adopted a child in 2020. This credit is worth up to $14,300 for each child. The Adoption Tax Credit, on the other hand, is non-refundable and can only be claimed if there is a federal tax bill.
The following criteria would determine eligibility for the Adoption Tax Credit.
1.To be eligible for the Adoption Tax Credit, you must have adopted the child during the 2020 tax year. The adopted child must be under the age of 18 and be mentally or physically incapable of handling his responsibilities.
2. Your income should be within the limits required to obtain this credit. In the year 2020, if your family’s AGI is less than $214,520, you will be able to claim the full Adoption Tax Credit. If the family’s AGI falls between $214,520 and $254,520, the family will be eligible for only Partial Credit. If a family’s AGI exceeds $254,520, the Adoption Tax Credit cannot be claimed by the family.
Child and Dependent Care Credit is a tax credit for people who provide care for their children
The Child and Dependent Care Credit is not the same as the Child Tax Credit. These are two distinct credits available to parents of children. This credit would assist you in reducing your financial obligations while you are looking for work. This credit is equal to 25-35 percent of your qualified expenses. The amount of credit you would receive would be determined primarily by your level of income and how much you have spent on child and dependent care. You can claim $3000 for each qualifying dependent or $6000 if you have two or more dependents.
Earned Income Tax Credit (EITC)
The amount of Earned Income Tax Credit (EITC) you are eligible to receive is determined by the number of children you have, your tax filing status, and your income. The Earned Income Tax Credit can range from $538 to $6660 for the tax year 2020, and it can range from $538 to $6728 for the tax year 2021. You are eligible to calculate your EITC using your income from 2019 or 2020, whichever is greater.
Adjustment for withholding taxes
You may be able to adjust your total tax withholdings on your Form W-4 if you have a newborn baby. By adjusting your withholding, you can ensure that the correct amount is withheld from the amount you receive as your paycheck, and as a result, you will have to pay fewer taxes when you file your returns.