What filing status should I choose?
Your “filing status” helps determine how much taxes you owe and the size of your refund. There are 4 main options to choose from, but most new parents should be using Head of Household or Married Filing Jointly. We’ve outlined the key differences below, but you can use an interactive tool from the IRS to help you identify your status.
Here are some of the key differences:
Head of Household - For single parents or taxpayers who live with their child or another dependent and provide for them by covering more than half of costs of keeping up a home. Taxpayers who are married, but who lived apart from their spouse for the last 6 months of the year may use this status IF they are filing a separate return from their spouse, paid more than half the cost of keeping up the home, and live with their child.
Single - For single taxpayers who are unmarried and will not have a child as of December 31, 2020. Parents who are unmarried and have a child who will be claimed by the other parent would also use this status.
Married Filing Jointly - For taxpayers who are married, live together, and will be filing taxes with their spouse. They may or may not have children.
Married Filing Separately - For taxpayers who are married, and will be filing taxes separately from their spouse. This filing status means you miss out on many tax credits, so it should only be used if required.
If your spouse is a nonresident alien, please see the FAQ below.
If your spouse died in 2020, you will file as Married Filing Jointly or Married Filing Separately. If your spouse died in 2018 or 2019, you may be eligible to file as Qualifying Widower, but we encourage you to use the IRS tool to determine what filing status is best for you.
Can I get tax credits for childcare expenses?
Yes - If you paid someone to care for your child (like in a daycare or in-home center) while you worked or were looking for work you may be able to claim the Child and Dependent Care Credit on your federal income tax return. This credit can reduce the amount of taxes you will owe. There are specific eligibility requirements for claiming this credit though which include having earned income, but if you file with a tax software it will determine this for you.
To access this credit you need to get a copy of a receipt for your childcare costs over the year and will need to input the taxpayer identification number of the center on your taxes (so either the employer identification number for the center or a SSN for an individual provider). The credit can reduce your taxes by up to 35% of your qualifying child care expenses, or up to a max expense of $3,000 for one child.
How do taxes change if I have a dependent?
The way you file taxes likely will change once you have a child as it affects:
Your filing status, and
the credits you are eligible for
To unlock these credits your child must be considered a “dependent” which means that they meet some basic requirements outlined in our FAQ above. Remember, that when filing as a new parent you should make sure you have a tax ID like a SSN or ITIN for your child. You'll want to use this information on your tax forms!
First, you will want to reassess your “filing status” and determine what status makes the most sense for your situation. For example, if you are a new parent who is raising your child by yourself, your filing status would change from “Single” to “Head of Household”. If you are married, your filing status would remain the same.
Second, there are countless new credits you are newly eligible for as a new parent like the Child Tax Credit and the Earned Income Tax Credit. They all have different requirements, but many require some earned income (like W-2 or gig work) and your child to have a SSN. If you have earned income (meaning income from W-2 or gig work), a SSN, and make between $10K and $30K we estimate that you are eligible for ~ $4,500 in federal tax credits.
Last, you want to be sure you collect your “stimulus check” (Economic Impact Payment) supplement if you had a child in 2020 and didn’t receive the $500 for them yet.
Who qualifies as a dependent?
You can use this checklist to determine if you should claim a dependent on your taxes:
Are they a citizen or resident? The person must be a U.S. citizen, a U.S. national, U.S. resident, or a resident of Canada or Mexico.
Are you the only person claiming them as a dependent? You can’t claim someone who takes a personal exemption for himself or claims another dependent on his own tax form.
Are they related to you? The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, adopted child or an offspring of any of them.
Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There is no age limit if your child is permanently and totally disabled.
Do they live with you? Your child must live with you for more than half the year, but several exceptions apply. Note that a newborn born anytime in 2020 would not need to have lived in the house for 6 months, and instead would just need to have lived there for more than half the time since birth. For example, if the child was born on December 31st and lives with mom and meets the other requirements, it would be considered a dependent.
Do you financially support them? Your child may have a job, but that job cannot provide more than half of her support.
Are you the only person claiming them? This requirement commonly applies to children of divorced parents. Here you must use the “tie breaker rules,” which are found in IRS Publication 501. These rules establish income, parentage and residency requirements for claiming a child.
If my taxable income is low, should I still file?
The answer is most likely yes.
Even if you didn’t earn enough money to legally have to file taxes (less than the standard deduction if only W-2 income and less than $400 if you have self-employment income), there could be still reasons to file taxes for free. We know that filing taxes is a pain, but you could be missing out on hundreds or even thousands of dollars if you don’t!
If you only had W-2 income but made less than the standard deduction (so less than $18,650 if Head of Household or $24,800 if Married Filing Jointly), then you should file taxes because you are likely missing out on hundreds if not thousands of dollars worth of credits through the Earned Income Tax Credit. You also likely had money taken out of your paycheck (“tax withholdings”) that you should also get back!
If you didn’t have any earned income, but did have a child in 2020 and have a SSN then you were eligible for an extra $500 in addition to your $1,200 stimulus check (Economic Impact Payment). If you did not receive this supplement and/or didn’t receive the $1,200 stimulus check, you should definitely file taxes this year to get this money!
You may also be eligible to get back some taxes that were withheld from other income (like unemployment compensation or gambling winnings or some social security benefits) if your total income was less than the standard deduction. This means that there might have been taxes taken out already, and you have to file to get that money back!
What if my spouse is a non-resident alien?
If you are a citizen or resident alien and your spouse is a nonresident alien, you have a choice. You can either file as Married Filing Jointly and count them as a resident alien for tax-filing purposes. This gives you a larger standard deduction, but also means you have to consider your spouse’s income from all over the world.
Your other option is to file as Head of Household if you meet that criteria of providing for more than half of the home costs and have a child who lives with you. With this option you take a smaller standard deduction and your spouse would file taxes separately.