The New Year brings a new start, new opportunities, and yes, the preparation of new taxes. Do not miss out on savings designed specifically to help parents with the cost of raising children.

I had a baby in 2010. What happens on my tax return?

That adorable little family member may be priceless, but on the tax return, he or she is monetarily worth up to $1000.00. If you had a baby in 2010, don't forget to claim the Child Tax Credit. H&R Block provides information on this credit and what it means for families this year. (Stay tuned, next week we'll have a giveaway and you could receive a free tax preparation package from H&R Block.)

There is also an adoption credit, allowing big savings for families who have brought a child into their home.

H&RBlock.com lists some qualifications for claiming a child as a dependent on your tax return:

"In either situation, 3 conditions must be satisfied:

  • You are not a dependent of another person.

  • If the child files a joint return, the return is filed only to claim a refund and neither the child nor the child's spouse would have a tax liability if they file separate returns.

  • The child is a U.S. citizen, resident, or national, or a resident of Canada or Mexico for part of the year.

A child is your qualifying child if all the following additional conditions are satisfied:

  • The child is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of them.

  • The child is younger than age 19, a full-time student younger than 24 or a disabled child. If the child is not disabled, the child must be younger than you (and your spouse if you are Married Filing Jointly).

  • The child did not provide more than half of his or her own support.

  • The child must live with you more than half of the year. A newborn child is considered to have lived with you for the entire year."

Important information for claiming a child as a dependent

1. Do not forget to apply for a social security number. Many times, hospitals will present this paperwork to parents before they leave the hospital. You'll need to provide your accountant or financial planner with the number, or include it on your tax return if preparing tax returns yourself.

2. Realize that the child tax credit may be different based upon your income.

3. According to the Internal Revenue Website, the child must be claimed as a dependent on your federal return, and the child must be under the age of 19.

I've gone back to work and have started using daycare. Are there some tax breaks that I can claim when I file?

If you're working while your child is in some else's care, you may be eligible for the Child Care Tax Credit. One of the most overlooked tax deductions, a credit reduces a tax bill dollar for dollar. Parents who miss out on this could be paying an unnecessary chunk of change.

A couple of tips from Smart Money, by the Wall Street Journal:

"The credit can be claimed only for childcare expenses that facilitate your going to work. If you're married and file jointly, you can generally claim the credit only if your spouse also works or goes to school full-time for at least five months during the year."

"For 2010, the credit is based on up to $3000 of eligible expenses to care for one child under 13 or up to $6,000 for two more. If your child turns 13 during the year, only expenses before his birthday count."

More facts from IRS website list of Top Ten Facts About the Child and Dependent Care Credit.

* Some of this tax information is courtesy of H&R Block.

This post is for informational purposes only. Parenting Squad and its authors do not provide any legal or financial advice.

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