What Are the Tax Breaks for Having a Baby?

Welcoming a new baby brings joy and new responsibilities, including changes to your financial landscape. The U.S. tax code offers several benefits to parents. Understanding these tax provisions can lead to savings, helping to offset some of the costs associated with raising a child. These benefits are not automatic; you must take specific actions when you file your annual income tax return.

Defining a Qualifying Child for Tax Purposes

Before you can claim most child-related tax benefits, your new baby must meet the IRS definition of a “qualifying child.” This definition is based on four specific tests, all of which must be met. While these four tests define a qualifying child, some tax benefits have their own specific requirements, particularly regarding the child’s age.

The first test is the relationship test. Your child must be your son, daughter, stepchild, or an eligible foster child. An adopted child is always treated as your own child, including a child lawfully placed with you for legal adoption, even if the adoption is not yet final.

Next is the age test. A child must be under age 19 at the end of the tax year, or under age 24 if they are a full-time student for at least five months of the year. There is no age limit for a child who is permanently and totally disabled.

The residency test requires that the child must have lived with you for more than half of the year. Temporary absences for things like school, vacation, or medical care are counted as time lived at home. For a baby born during the year, they must have lived with you for more than half of the time they were alive.

The final requirement is the support test. This test dictates that the child cannot have provided more than half of their own financial support during the tax year. The child also cannot file a joint tax return for the year, unless it’s solely to claim a refund of taxes withheld.

Primary Tax Credits for a New Child

A tax credit is a dollar-for-dollar reduction of your tax liability. The Child Tax Credit (CTC) is valued at up to $2,000 per qualifying child under the age of 17. To receive the full credit, your modified adjusted gross income (MAGI) must be below $200,000 for single filers or $400,000 for those married filing jointly. The credit is reduced for incomes above these thresholds. A portion of this credit, up to $1,700 for 2025, is refundable, meaning you could receive it as a refund even if you don’t owe any federal income tax.

Another benefit is the Child and Dependent Care Credit (CDCC), designed to help parents who pay for childcare so they can work or look for work. This credit is calculated as a percentage of your qualifying expenses. You can claim between 20% and 35% of up to $3,000 in expenses for one child or up to $6,000 for two or more children. The percentage you can claim depends on your adjusted gross income. To be eligible, you and your spouse (if filing jointly) must have earned income, and the care must be for a child under age 13.

For parents who adopt, the Adoption Tax Credit provides financial relief. For 2025, this nonrefundable credit is worth up to $17,280 per eligible child and covers qualified adoption expenses like fees, court costs, attorney fees, and travel expenses. The credit begins to phase out for taxpayers with a MAGI above $259,190 and is eliminated for those with a MAGI of $299,190 or more. If your employer offers an adoption assistance program, you may also be able to exclude up to $17,280 of that assistance from your taxable income.

Other Potential Tax Savings

The Earned Income Tax Credit (EITC) is a refundable credit for low- to moderate-income working individuals and couples. Having a qualifying child can make you eligible for the EITC or increase the amount you receive. For the 2025 tax year, the maximum credit for a taxpayer with one qualifying child is $4,328. The income limits to qualify for the EITC are also higher for taxpayers with children.

Your filing status could also change. If you are unmarried on the last day of the year, you may be able to use the Head of Household filing status. To qualify, you must have paid more than half the cost of keeping up a home for the year for yourself and your qualifying child. This status provides a larger standard deduction and more favorable tax brackets compared to filing as single.

You can also use tax-advantaged savings accounts to pay for medical costs associated with childbirth and infant care. If you have a Health Savings Account (HSA) or a Flexible Spending Account (FSA), you can use these funds for qualified medical expenses with pre-tax dollars. Eligible expenses include costs related to prenatal care, labor and delivery, and postnatal care for both mother and baby.

Required Information and Documentation

To claim these tax benefits, the most important piece of information is your child’s Social Security Number (SSN). The IRS requires an SSN for each child you claim for the Child Tax Credit and other benefits. Without it, you cannot claim these credits.

The most convenient way to obtain an SSN for your newborn is to request one at the hospital when you provide information for the birth certificate. This is the simplest method and ensures you receive the card without a separate application process. If you don’t apply at the hospital, you will need to file Form SS-5, Application for a Social Security Card, with the Social Security Administration and provide documents proving your child’s age, identity, and U.S. citizenship, as well as proof of your own identity.

For parents who adopt, an Adoption Taxpayer Identification Number (ATIN) may be needed if you are in the process of a domestic adoption and cannot get an SSN for the child yet. To claim the Child and Dependent Care Credit, you must have the name, address, and Taxpayer Identification Number of your childcare provider. For the Adoption Credit, you must keep records of all qualified adoption expenses, such as receipts for legal fees and travel.

Claiming the Benefits on Your Tax Return

The final step is to claim these benefits on your federal income tax return, Form 1040. This is the central document where you will report your income and dependents.

To claim the specific child-related credits, you will need to attach additional forms and schedules to your Form 1040. The Child Tax Credit is calculated using Schedule 8812, Credits for Qualifying Children and Other Dependents. This schedule walks you through the calculation to determine the amount of your nonrefundable Child Tax Credit and the refundable Additional Child Tax Credit.

For the Child and Dependent Care Credit, you must complete and attach Form 2441, Child and Dependent Care Expenses. On this form, you will report the information about your childcare provider and calculate the credit based on your expenses and income. If you are claiming the Adoption Credit, you will use Form 8839, Qualified Adoption Expenses, to report your expenses and calculate the credit.