How Will Having Children Affect Someone's Tax Filing

How will having children affect someone's tax filing. If you have children, the following are some things you'll want to be aware of when filing your tax returns. Having a child is a blessed event- and a...

Having a child is a blessed event- and a great expense, as any parent will tell you. There is good news, however, in that having a child may qualify you for some tax benefits. If you have children, the following are some things you'll want to be aware of when filing your tax returns.


Attorney and CPA, Brian K. Gilroy, offers good news to parents: "Children are deductible. You get an extra exemption for children... providing that they were your dependant." A tax exemption reduces the amount of your income that can be taxed. Gilroy continues, "There are very specific guidelines as far as who is a dependant. There is a series of tests for dependancy."




The IRS considers a child a dependent if he/she is your son, daughter, stepchild, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendent of any of these (for example, a grandchild or nephew). A child lawfully placed with you, such as an adopted child or foster child, also may qualify. Further, the child must be under the age of 19 by the end of the year, a full-time student under the age of 24, or a disabled child (meeting specific criteria) of any age. The child must have lived with you for more than half the tax year, with exceptions made under special circumstances, such as absences for educational or medical purposes, or if the child were kidnapped. Finally, you must have provided more than half of the child's support for the year.

For newborns in a family, Gilroy adds a reminder that "Children have to be born before the end of the tax year." This means that if your child is born on or after January 1st of 2006, even though the child is 3 months old when you're filing your taxes, you cannot claim that child on your 2005 tax returns. In addition, if tragedy strikes, you may still be able to claim an exemption. "If you have a child that dies during the tax year, if they lived one day in the year you still get to claim them," says Gilroy. While this does apply to newborns who have died shortly after birth, exemptions are not permitted for stillborn births.

In addition to being deductible, children may make you eligible to receive a tax credit. "A deduction only deducts what you owe in taxes, a credit will give you money back. So children are valuable in that case," explains Gilroy. Some credits for which you may want to determine if you qualify are:

Child and Dependent Care Credit- for those who pay child care expenses for children under 13 years of age in order to work or find work.

Child Tax Credit- a credit for those with a qualifying child (in the 2005 tax year, this credit is up to $1000 per qualifying child).

Additional Child Tax Credit- a credit for those who did not qualify for the full amount of the child tax credit.

Special circumstances may apply in the case of non-custodial parents or joint custody. Generally, only one person can treat the child as a qualifying child. Says Gilroy, " Who gets credit for the dependents? If there's a child, in a divorce, sometimes the court order will dictate it, the IRS doesn't always necessarily follow the court order."

One must refer to the tests to determine what specifically qualifies a child as a dependent. Gilroy adds, "In situations there is a thing called a multiple support agreement if nobody provides more than 50% of the support. But, if in a situation where you have a child and there's questions about who's dependant he is, there's a fine line... to make sure you follow the code."

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