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Have a new baby? Heres how to prepare for tax time

Potomac Local News: Today, what we’re going to talk about is preparing for your new baby. There are some tax implications that come with having a new child growing the family, correct?
Chris Peden: That’s absolutely right. The first one is a child tax credit, which can give you up to $2,000 per child as a tax credit on your taxes. They just need to be under 17.
You provide at least half their support and they live with you at least half the year. So that’s something that can certainly help parents out of tax time.
Potomac Local News: Are there things like documents, records that that should be held on to immediately or throughout the year? What should parents be doing to collect, I guess, build a file for tax time?
Chris Peden: Absolutely. One thing we always need is a Social Security card because that’s going to go on a tax return to be able to claim your child.
Second, we’re just going to need some proof that the child actually lived with you. A great way to do this is to have a doctor bill with a child’s name on it and your address also your poly may end up putting the child in child care. So you want to get a document from the child care provider that has their name, how much they spent with them, as well as their tax period notification number so that you can take a credit deduction for the child care that is being provided for you.
Potomac Local News: And we don’t want to forget about new parents who are adopting a child. Are there ways people can save on their taxes with these fees and these adoption fees?
Chris Peden: You can deduct up to $14,080 for your 2019 taxes for the expenses that you incurred to adopt the child. However, if you have a special-needs child, you automatically get that $14,080 credit. So you want to keep track of everything that you’ve spent to get that child adopted in as part of your family. Keep records of what you have spent with lawyers, adoption agencies or what have you.
Anything that could go into claiming that child as your child for the adoption credit. And, really, what I say to my clients is “keep all the information, gathered together. Let us go through it, review it, so we can see the deductions you can and can’t take. Let’s work with you to see what we can deduct for you.
Potomac Local News: And finally, as your child grows, as it gets out of the infant stage or into the toddler phase, what else should you think about when it comes to your children and taxes?
Chris Peden: Your child’s education. When you contribute to a Virginia 529 plan, you get $2,000 per child. So something to keep in mind because you want your child going to college. That’s one way that you can take advantage of tax laws to pay for college.

Chris Peden is the principal owner of Peden Accounting Services in Manassas. Contact him today for all of your business accounting needs by calling 703-967-1948.

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