1. Tax withholding adjustment:
Check with your accounting department and find out how much you are withholding on your W-4. With a growing family, you may want to make an adjustment to ensure that the appropriate amount of taxes is withheld from each paycheck so that you owe less when you file your tax returns.
2. Dependents: Flexible Spending Account:
If offered by your employer, consider participating in a dependent care spending plan. This is potentially a great fit if your child is enrolled in daycare; you can use pre-tax dollars to pay for childcare expenses.
3. 529 Plans:
When you become a parent, future expenses and savings come to mind. 529 plans can help you prepare for your child’s future by offering financial aid and tax benefits when you want to save for your child’s education. You have the choice to either opt for a college savings plan or a prepaid tuition plan. College savings plans operate like a 401K or ROTH IRA by investing after-tax contributions in mutual funds. Prepaid tuition lets you pay in full or prepay tuition for in-state public college costs or adjusted for use at private or out-of-state schools.
4. Earned Income Tax Credit:
If you have children and are part of the lower income bracket, the Earned Income Tax Credit can offer a tax credit from $560 to $6,935 (2022 tax year) based on your number of children and your household income.
5. Earned Income Tax Credit:
If you’ve decided to adopt a child, you may be eligible for the Federal Adoption Tax Credit with almost $15,000 credit per child. This is a nonrefundable credit that maintains some special restrictions and limitations.
6. Child & Dependent Care Credit:
This credit is designed to offset childcare costs and qualified expenses for up to $3,000 per qualified dependent or $6,000 for two or more. If you’re not able to utilize the Flexible Spending Account, this will greatly benefit you.
7. Child Tax Credit:
If you have a child under the age of 17, you can take advantage of the Child Tax Credit which is up to $2,000 per qualifying child depending on your income bracket. The Child Tax Credit was created to help offset the high cost of raising dependent kids.