Here’s How Having a Baby Affects Your Taxes

Chelsea Zhao is an assistant director of High-Net-Worth Tax Planning at Northwestern Mutual. 

Welcoming a baby marks the beginning of a whole new chapter for your family. It’s also a time of transition for your finances. While the cost of raising a child can be high, becoming a parent does open the door for some tax breaks. How much of a tax deduction you get per child depends on your income and whether your kiddo counts as a qualifying dependent. Let’s dive into the tax implications of having or adopting a baby. 

How much do you claim per child on taxes? 

In 2024 and 2025, parents can get up to $2,000 in tax benefits per child, thanks to the child tax credit. A tax credit directly reduces your tax liability (the amount you owe), which can provide some much-needed financial relief for new parents. To qualify for this credit, your child must be younger than 17, have a Social Security number and be claimed as a dependent on your tax return. But income limits do apply: If your income is more than $400,000 as a married couple filing jointly ($200,000 for all other filers), the credit you can claim is reduced or eliminated. 

This $2,000 credit is stipulated in the Tax Cuts and Jobs Act, which overhauled federal taxes when it passed in 2017. Some parts of the Act are set to expire at the end of 2025, including this credit amount and the exact income limits. So the credit may revert to $1,000 per child, and the income limits may be much lower unless Congress passes new legislation.  

There’s another reason this child tax credit is a popular tax break for parents. It includes a refundable portion known as the Additional Child Tax Credit. You could get up to $1,700 per child as a refund, even if you no longer owe any tax. For example, if you have a baby and your total child tax credit is $2,000, but your tax liability (before the credit) for the year is only $1,000, you could get that difference as a tax refund.  

Can I claim my newborn on my 2024 taxes? 

Let’s say you had a baby last year. You can claim them as a dependent on your tax return if:  

• They have a Social Security number. You’ll likely apply for one at the hospital. After that, it can take up to six weeks to receive it. If you’re cutting it close, you can file a tax extension, which gives you another six months to complete the tax return. (You don’t need to provide their birth certificates to claim them as a dependent.) 
• They’re related to you, whether as a biological child, stepchild, adopted child or foster child. 
• You’re their primary source of financial support. 
• They’re a U.S. citizen, U.S. national or U.S. resident—or they reside in Canada or Mexico. They live with you for more than half the year (but you can claim the credit even if your child was born on December 31). 
• Someone else isn’t claiming them as a dependent on their tax return. 

Who can claim a new baby on their taxes? 

It depends on your situation. Below is a breakdown of who can claim a new baby on their tax return.  

• Married couples filing jointly: Both parents claim the child as a dependent via their joint tax return. 
• Married couples filing separately: Only one parent can claim the child as a dependent. 
• Couples who are separated or divorced: Again, only one parent can claim the child as a dependent. 
• Unmarried couples: Only the parent with the higher adjusted gross income can claim the child as a dependent. 

How to use your child tax credit 

Raising a child is expensive, but the child tax credit can help offset some of those costs. Here are a few ideas for how to use your child tax credit. 

• Use it for everyday living expenses. 
• Put it toward medical bills from the birth or adoption costs if applicable. 
• Use it to help fund your parental leave. 
• Set it aside for childcare costs. 
• Pay down high-interest debt. 
• Add it to your savings. 
• Put it into a 529 college savings account for your child. 
• Consider a life insurance policy for your child. 

A new baby can bring a lot of joy to your family as well as some unexpected tax benefits. Some tax deductions could even land you in a lower tax bracket. And there are some other tax benefits available to your growing family, such as the adoption credit, the child and dependent care tax credit, a flexible spending account (FSA) through work and a 529 plan. It’s worthwhile to check if you meet the requirements.   

As your day-to-day spending and long-term financial goals evolve, leveraging these tax breaks can make a substantial difference. That’s why your Northwestern Mutual financial advisor can be such a great resource. They can review your financial health and help you prepare for the future—and your baby’s future, too.  

This publication is not intended as legal or tax advice. Financial Representatives do not render tax advice. Consult with a tax professional for tax advice that is specific to your situation.