Babies cost a lot. I know some people say they don't. But believe you me - they do when both parents work: food, clothes, diapers, daycare...etc.
I always had it in my head before I had babies that you get this huge tax credit for having them. It was basically told to me by everyone. If we are specifically talking about the Child Tax Credit (not to be confused by credits/accounts for daycare) - the Child Tax Credit isn't all that its cracked up to be.
To get the Child Tax Credit, a bunch of criteria have to be met. One of them is the child is related to the taxpayer as a son, daughter, stepchild, foster child, adopted child, brother or sister; or a descendant of any of these relations such as a grandchild, nephew, or niece.
I'm going to talk from a standpoint of just "having a baby" in general terms. For every child, you can get $1,000 credit. Credit means basically the bottom line of your tax liability is decreased dollar for dollar. If you were going to get back $1,000 is taxes - if you qualify for the maximum credit - you actually are going to get $2,000 if you claim the Child Tax Credit. That's if you qualify.
Click the following link for the IRS qualification parameters:
Here is one of the big "qualifiers" that will kick you in the butt. The child tax credit, like other credits, is gradually reduced based on a person's income for the year. The child tax credit starts to be reduced when income reaches the following levels:
- $55,000 for married couples filing separately,
- $75,000 for single, head of household, and qualifying widow(er) filers, and
- $110,000 for married couples filing jointly
In the phaseout range, the child tax credit is reduced by $50 for each $1,000 of income above these threshold amounts. These phaseout ranges are set by statute and not indexed annually for inflation.
Yeah. That sucks. Not trying to get political or anything, but if you make more money - you get less in credits. Ugh.