Ask a CPA_ 3 Can’t Miss Tax Savings for New Parents
Congratulations on becoming a new parent! Not only is this a major life-changing event, it also has some seriously positive tax implications. There are several tax benefits available to new parents, as well as considerations to take into account as you plan your new child’s future.
First off, keep in mind that in order to claim your child as a dependent, s/he would need a Social Security card first. Make sure to take care of this as soon as your child is born, in order to claim them as a dependent as soon as possible. Remember that even if your child is born on December 31, you can still claim him/her for the entire year. Additionally, you may want to submit a new W-4 at work in order to adjust your tax withholding status.
Here are some tax savings to keep in mind as your family starts growing:
-
Check if your employer offers a dependent care Flexible Spending Arrangement (FSA).
Take advantage of any dependent care Flexible Spending Arrangement offered by your employer as a tax benefit. FSAs allow you to contribute on a pre-tax basis $5,000 towards childcare. This is $2,000 over the normal contribution limit of $3,000, and you should definitely take advantage of it.
-
Invest in a 529 Plan.
Even if you can’t fund it right away, consider opening a 529 plan for your new addition. Even minimal monthly contributions can add up over time. Additionally, consulting a financial planner on a yearly basis to discuss your current financial standing as well as your college savings goals can prove rewarding as you plan your child’s future. Also keep in mind that grandparents are allowed to fund a 529 plan, so encourage them to help as well.
-
Use a tax pro!
Don’t let the variety of tax deductions and credits available to you as a new parent overwhelm you. Instead, consider hiring the services of a tax professional to avoid mistakes as you do your taxes yourself.
Becoming a new parent is one of the most exciting milestones you’ll ever reach. Congratulations on this new part of your journey, and don’t hesitate to consult a tax professional to answer any questions you may have!
To Your Success,
The Corporate Sis.
