New Parents’ Guide to Tax Benefits: Making the Most of Your 2024 Tax Return

New Parents’ Guide to Tax Benefits: Making the Most of Your 2024 Tax Return

Welcoming a new baby changes everything – including your tax situation. Between midnight feedings and diaper changes, tax planning might be the last thing on your mind. However, understanding the tax benefits available to new parents could put thousands of extra dollars in your pocket during the 2025 tax season.

Think of your new tax situation like assembling a baby’s room – you need the right tools, proper planning, and attention to detail to create something that works for your family. Let’s break down exactly what you need to know to maximize your tax benefits as a new parent.

Getting Started: Social Security Number Requirements

The foundation of claiming any child-related tax benefit starts with obtaining your baby’s Social Security number. Without it, you cannot claim your child as a dependent or access valuable tax credits. Many hospitals help you apply for this document right after birth, but if you miss this opportunity, acting quickly becomes crucial.

To obtain a Social Security number after leaving the hospital, you’ll need to visit a Social Security Administration office with your child’s birth certificate and your own identification. Tax experts advise parents who don’t yet have their child’s Social Security number to file for a six-month tax extension while waiting for the documentation to be processed.

Understanding the 2024 Child Tax Credit

The Child Tax Credit represents one of the most significant tax benefits for new parents. This credit directly reduces your tax bill, providing more substantial savings than a deduction. For the 2024 tax year, qualifying parents can receive substantial credits for each eligible child.

Income thresholds play a crucial role in determining your credit amount. Single parents with adjusted gross incomes below $200,000, or married couples filing jointly with incomes under $400,000, can qualify for the full credit. Above these thresholds, the credit begins to phase out gradually.

Maximizing the Dependent Care Credit

If you’re employed and paying for childcare, the Child and Dependent Care Credit offers significant tax relief. This credit helps offset the cost of qualifying childcare expenses while you work or look for work. For 2024, parents can claim up to $3,000 in expenses for one child or $6,000 for two or more children.

Remember that not all childcare arrangements qualify. The care provider must be properly documented, and you’ll need their tax identification number or Social Security number. Keep detailed records of your payments throughout the year, including receipts and provider information.

Strategic Filing Status Decisions

New parenthood might change your optimal filing status, particularly for single parents. The head of household status offers several advantages, including a higher standard deduction of $21,900 for the 2024 tax year – significantly more than the $14,600 available to single filers.

Additionally, head of household status provides access to more favorable tax brackets, potentially reducing your overall tax burden. However, you must provide more than half of the household’s financial support and have a qualifying dependent to claim this status.

Medical Expense Deductions

The costs of pregnancy, childbirth, and pediatric care can be substantial. If your total medical expenses exceed 7.5% of your adjusted gross income, you may qualify to deduct these costs. This includes expenses like:

• Prenatal care and childbirth expenses
• Hospital stays and medical procedures
• Breast pumps and lactation supplies
• Prescription medications
• Health insurance premiums not paid with pre-tax dollars

Additional Benefits Worth Exploring

The Earned Income Tax Credit (EITC) becomes more generous when you have children. For 2024, parents with one child and an adjusted gross income under $49,084 (single) or $56,004 (married filing jointly) can claim up to $4,213 through this refundable credit.

Those who adopted in 2024 might qualify for an adoption credit of up to $16,810 to offset qualifying adoption expenses. This credit can cover adoption fees, court costs, attorney fees, and travel expenses related to the adoption.

Avoiding Common Pitfalls

Don’t let simple mistakes cost you valuable tax benefits. Common errors include:

• Forgetting to update your W-4 withholding with your employer
• Missing required documentation for childcare expenses
• Incorrectly calculating income thresholds for credits
• Overlooking state-specific child tax benefits

Planning for the Future

Smart tax planning extends beyond the current tax year. Take these steps to prepare for next year:

• Review and adjust your tax withholding using a new W-4 form
• Consider opening a Dependent Care FSA during your next benefits enrollment
• Create a system for tracking medical expenses and childcare receipts
• Set calendar reminders for quarterly estimated tax payments if self-employed

Work With Us

Trying to figure out the tax implications of new parenthood involves numerous decisions, opportunities, and challenges for tax savings. While the various credits, deductions, and status changes might seem overwhelming, proper planning can help you maximize your benefits while avoiding costly mistakes.

At Avior, we specialize in helping new parents optimize their tax strategy while building a strong financial foundation for their growing family. Our team can help you navigate these complex tax decisions while keeping sight of your long-term financial goals. Contact Avior Wealth Management today to schedule a consultation and ensure you’re maximizing every tax advantage available to your family.

Disclaimer: Nothing contained herein should be construed as legal or tax advice. Avior and our Advisors will work with your attorney and/or tax professional to assist with your legal and tax strategies. Please consult your attorney or tax professional with specific legal and/or tax questions. Investment Management and Financial Planner are offered through Avior Wealth Management, LLC, an SEC-registered investment advisor. Past performance is not a guarantee of future results.  Investments are subject to loss, including the loss of principal.