By: Brian Ashcraft, Regional Director for Corporate, Liberty Tax Service
So, you and your significant other are ready to take the plunge and add a new baby to your household. Good for you.
I’m guessing you’re not thinking about taxes as you make this decision, and that’s totally understandable.
But babies do change your tax situation, so I thought I’d share a few of the tax deductions and credits available to families in 2018.
Pregnancy Test Kits. Birth Control Pills. Fertility Enhancement. These count as medical expense deductions. For medical expenses to be deductible, you’ll have to itemize your tax deductions, and your medical expenses must exceed 7.5 percent of your adjusted gross income.
Nursing moms can include the cost of breast pumps and supplies in their medical expense deductions. Lactation expenses are also deductible as are laboratory fees that may be a part of your medical care.
The New Arrival
The tax deduction that comes with your new arrival can’t match the joy, but this still should make you happy. Under the new tax law, the child tax credit has doubled to $2,000 per qualifying child. And, unlike a tax deduction, which reduces the amount of your income subject to tax, a tax credit reduces your tax bill dollar for dollar.
Planning for Baby’s Future
The new tax law lets parents save tax-free for their child’s education. Under the law you can use up to $10,000 per child from a 529 plan to pay qualified expenses for elementary and secondary school and home school. The 529 plans can also be used to pay for college.
Speaking of college, if you want to think that far ahead, two tax credits are available to help with qualified educational expenses. Those credits are the American Opportunity Tax Credit, which provides a credit of up to $2,500 for qualified tuition and expenses for the first four years of college, and the Lifetime Learning Credit, which provides up to $2,000 per return.
I apologize if I’ve gotten too far ahead of you by talking about schooling and college and all those things. I’ll bring it back to the here and now by reminding you that whether your bundle of joy is born on January 1 or December 31 of the year, you can take a full $2,000 child tax credit.
And remember, as your child grows, the tax code is bound to change. You’ll want to make sure you get all the tax deductions to which your family is entitled. The best way to do that is to talk with a tax professional. It’s their job to keep up with the tax code. And, because they do their job, you can do yours, enjoying life with your new addition.
About the Author
Brian Ashcraft is the Regional Director for Corporate for Liberty Tax Service, a leading tax preparation franchise. Brian