March 2013 Moms

anyone know about taxes.....adding dependent

My husband and I owe every year and I am nervous because we are now adding someone new to our family....

also I am taking STD for 6 weeks....will I owe because of this.

Any advice is greatly appreciated. I am such a dope when it comes to this stuff.

thanks!!!! :) 

Re: anyone know about taxes.....adding dependent

  • I'm assuming that you are in the US, so with that, adding a dependent should actually lower your tax burden.  STD is considered income, so it also should have too much impact.

    It's been a LLLLOOOONNNNGGG time since I've had a child in daycare/child care, but I believe you can deduct child care expenses from your taxes also, which would further lower your tax burden.  Of course, all of this won't apply until you are completing your 2013 taxes early next year. 

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  • No idea about the STD affecting things, but generally adding a dependent lowers what you owe in taxes. There are various credits you may qualify for (depending on your income).

    Because my husband is paid hourly, we're always nervous the taxes may not work out in our favor, so we actually claim one less dependent on his W-4s (with two kids, he can claim 4, he only claims 3), which means when we file our taxes and claim the extra dependent (all 4) we're more likely to have overpaid than underpaid and are basically guaranteed we will not owe. For us it's an extra $5-600 taken out of the check each year, but only about $50/month.

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  • STD is usually treated as replacement income in the U.S., so it would be taxed the same as your regular wages.  The exception would be if the payments were from a policy you paid for on your own, using after-tax money.  As far as forecasting your 2013 taxes, the IRS has a withholding calculator on its website where you can try to estimate your taxes for the year and adjust your withholding allowances on a new W-4 with your employer if you are under withholding.  There's also a worksheet on the form itself that would take having a dependent into account, but if you have other income (like investment income) or lots of deductions, the worksheet will only provide a rough estimate.

    As PP said, having a new dependent will generally lower your taxes, although that could be cancelled out if you are impacted by the increased rates for high income earners that were just passed by Congress.  If your taxes will significantly decrease, you can also increase the number of withholding allowances you are claiming, to get more $ during the year.  I personally like to end the year having paid enough in that I don't owe a huge bill, but I don't like to "lend" the IRS a huge chunk of money interest free by massively over withholding.  You do need to be able to reasonably estimate your expected income and deductions in order for the info from the withholding calculator to be anywhere close to correct.  

    One other tip, when you enroll your LO in any insurance you have through work, you may want to find out if your employer (or husband's) offers a dependent care spending account that you can use to pay some child care expenses on a pre-tax basis.  You usually have to enroll within 30 days of the birth, like you do with insurance.   

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  • I always use Turbo Tax for this reason. It asks if you have had a child during the year and then leads you to the appropriate questions, etc.
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  • Just another tax tip, I read somewhere recently that if you are a working mom you can deduct the cost of a breast pump. Of course if your breast pump is covered by insurance, that probably won't work. However, you might be able to find some other baby related costs that you can deduct next year if you do a little digging!
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  • thanks everyone.....all of your advice was helpful!!!! xo Best of luck to you all!!!xo
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