Wolters Kluwer Outlines Tax Benefits for New Parents

Welcoming a child? The tax code is here to help

Welcoming a new child into a family, can be very exciting, fulfilling, and rewarding but also very expensive. There are the hospital bills, baby’s room, clothes and diapers, special food, surrogate or birth mother expenses and travel. Even more pronounced is the possible loss of income of a stay-at-home parent.  The Tax Code, however, tries to be family friendly in a number of ways.

Do you know all the benefits?

“In addition to raising revenue to support our government, many don’t realize that the Tax Code is also structured to promote a number of social goals deemed worthy of encouragement, including helping families,” said Mark Luscombe, JD, LLM, CPA and Principal Federal Tax Analyst for Wolters Kluwer Tax & Accounting. “A number of Tax Code provisions are designed to make finances a little easier for new parents, with a few adjustments made by the Tax Cuts and Jobs Act.”

Top tax tips for new parents

A New Child Can Qualify Parents for a Number of Tax Breaks
  1. The Child Tax Credit, now up to $2,000
  2. The Child and Dependent Care Credit, up to $1,050 for one child; employer may also offer a tax-favored child care reimbursement account
  3. The Earned Income Tax Credit, with the maximum credit increasing from $529 with no qualifying children to $3,526 with one qualifying child for 2019
  4. The Adoption Credit, up to a maximum of $14,080 for qualifying adoption expenses for 2019; employer may also offer tax-favored adoption assistance program
  5. Code Sec. 529 Education Savings Plans, no deduction or credit, except possibly for state income taxes, but significant contributions, tax-free accumulation of earnings, and no income limits
  6. Coverdell Education Savings Accounts, up to $2,000 per year in non-deductible contributions and tax-free distributions for elementary and secondary education
  7. Medical expense deduction, possible additional itemized deduction for medical expenses of birth and child care if itemize deductions and total medical expenses exceed 10 percent of adjusted gross income
  8. Filing Status: A new child may change the filing status of a single parent from a single filer to a head of household filer
A Few Things to Watch
  1. Social Security number, obtain a Social Security number for the child as soon as possible for all of the tax benefits
  2. Qualifying Child, meet residency and support tests, especially an issue with divorced or separated parents
  3. The Kiddie Tax, can tax unearned income of the child at very high estate and gift tax rates
  4. The Nanny Tax, requires proper tax treatment of anyone hired to care for the new child. This includes reporting wages and withholding Social Security and Medicare taxes
Proposed legislation

Legislation currently under consideration in Congress would permit penalty-free withdrawals from IRAs for child birth and adoption expenses.

Stay informed

With all of the other things new parents have to worry about with the arrival of a new child, worrying about taking maximum advantage of the tax benefits can bring additional rewards.

Wolters Kluwer Tax & Accounting is here to help.  As a leading provider of software solutions and local expertise we help tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy, and efficiency.

To read the original Business Wire press release click here.

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Media Contact:
Marisa Westcott


Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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