Effects

• Having a baby has several positive effects on your taxes. Most taxpayers qualify for a $1,000 tax credit for each child. As of 2009, if your income is less than $35,463 for single people or $40,463 for married people, the IRS provides an earned income credit up to $3,043 for one qualifying child. In addition, working parents can receive a child care credit of $600 to $1,050 for each child. Each child also shelters $3,650 of your yearly income, which may result in a savings of $912, depending on your tax bracket. Sheltered income is the portion of the income that the IRS does not tax.
  
  

Expert Insight

• According to the IRS, you should change your W-4 with your employer after the birth of a child. Adding the child as another dependent on the form can increase your take-home pay by as much as $150 per month. The IRS also advises that single parents change their IRS filing status form single to head of household after having a child. This status change results in higher deductions.
  
  In addition, the IRS advises that parents consider contributing to a Section 529 State Education Savings Plan for your child can also reduce taxes.
  
  

Considerations

• Any child claimed must have been born by December 31 the prior tax year. In addition, parents must have a Social Security number for all children on their tax return. The best time to apply for a Social Security number is when applying for a birth certificate at the hospital soon after the baby's birth.