What is the actual tax benefit for a Dec. baby? - Mothering Forums

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#1 of 9 Old 12-12-2006, 01:32 PM - Thread Starter
 
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I read over and over that people (especially the hubby's) are hoping for a December baby so that they can get the tax write off. So what exactly is the incentive here? My vague understanding is that you get a deduction, but I don't know how much that is, and what does that mean in terms of actual cash for the average family? Sadly, I gave up doing taxes when we got married so I really have no clue about these things. I was always a straight-forward EZ form gal, but hubby gets his annual income from a number of sources so now we use a good tax guy, but it means I have no clue what is going on until I sign my name.

Anyhow, I would still much prefer baby to be born as far from Christmas/New Years as possible, tax credit and aching pelvis aside, but I was just curious. Any of you financial minded mommas got all the answers for the rest of us???
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#2 of 9 Old 12-12-2006, 01:45 PM
 
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It really depends on your income and how much you pay in taxes, honestly.
It can be really beneficial for low income parents because of the EITC.
Although the child tax credit and additional child tax credit can be pretty substantial, depending.
For us, DP claims two children and I claim one, and our refund will likely be about $9,000 this year. Our combined earnings were about $31,000 for the year.
You can go to hrblock.com and use the tax calculator to find out what a difference it will make.
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#3 of 9 Old 12-12-2006, 01:49 PM
 
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Wow that it alot for a return. DH and I made $35,000 one year and only got back 1,500. Last year we were over 80,000 and had to pay an extra $2700 in addition to the 22% on our paychecks we had already paid. I don't think there is a real savings for Canadians, but if we have our baby after Dec 31 this year each child receives $1,000- so we are hoping that she stays put till her delivery date of the 3rd.
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#4 of 9 Old 12-12-2006, 02:49 PM
 
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The cool thing about the tax law is that if you have your baby in Dec, you get to count him/her as a deduction for the whole year. They don't pro-rate it by month. So you kind of get a 'freebie' because you didn't actually pay to support the child all year.

(although there were all those extra trips to the ice cream parlor.....)
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#5 of 9 Old 12-12-2006, 07:37 PM
 
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Yeah, there's an extra deduction (so you get to claim another dependent...and hey, what with having to buy a whole new wardrobe or two AND all those extra trips to the ice cream parlor, I can see where that fits in) which reduces your taxable income, and then you also get an additional child credit (depending on things, about $1,000 per child), and that reduces the amount of taxes you owe. So it works out for our family to be a lot of money on our refund, since we're around $35,000 for the three (or four) of us. I'm not sure what happens when you start getting a lot more complicated tax scenarios. And I'm not sure what this year's child tax credit will be, since the dollar amount changes, I think.
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#6 of 9 Old 12-12-2006, 08:02 PM
 
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My friends who just had their baby said that it really only adds up to about a $220 cash benefit (although it will lower your taxable income and that might translate to more or less depending on how close to the line you are), but on average, it ends up being about $220 in your pocket...
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#7 of 9 Old 12-12-2006, 08:17 PM
 
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you will still get the tax deductible next year.

Have a great last few pregnant days!
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#8 of 9 Old 12-12-2006, 08:19 PM
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It completely depends on your income. For example, if you're married with no children and earn over $15,000 and file jointly, you would not be eligible for the earned income credit at all. But if you have a baby born this December, same income, you can file for and receive an Earned Income Credit of $2,550 on your 2006 taxes. So, for that family, having the baby in December rather than January will mean a gain of $2,550... not too shabby!

Dar, mom of a January baby... ::sigh:::

 
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#9 of 9 Old 12-12-2006, 10:28 PM
 
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When we had Eli on December 29, 2004, it was my understanding that, not only do you get the extra exemption for the dependent child, but also we got a child tax credit of $1500. Which made a HUGE difference for us on our taxes.
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