4 Tax Mistakes New Parents Make

Raising a child in America isn’t cheap. CNNMoney and FutureAdvisor reported that it would cost $245,340 to raise a child born in 2013 from birth through age 18.

That’s a lot of money. But your children can actually save you dollars one time each year: When you’re preparing your income taxes. Kids come with some valuable tax deductions and credits. The problem? Many new parents, understandably overwhelmed with the burdens of taking care of a baby, fail to claim these savings.

And that can cost them thousands of dollars. If you are a new parent, don’t pass on these key tax savings.

1. Skipping the Child Tax Credit

The child tax credit shouldn’t be overlooked. If you had a new baby in 2015, whether through birth, adoption, or the foster care system, you can claim this additional $1,000 tax credit. It doesn’t matter, either, on what day of the year you became a new parent. You can claim the credit even if you had your child on Dec. 31. Your child just needs to be younger than 17 at the end of the tax year in which you are claiming the credit.

“Having a baby gives you access to a tax bonus, and will help you reduce your taxable income,” said David Hyrck, partner with New York City’s Reed Smith. “I see way too many new parents who overlook this child tax credit. Everyone needs to be doing this.”

There is one downside to the tax credit: It is nonrefundable if the credit is higher than your tax liability. Say you owe the government $500. Your $1,000 child tax credit will erase the money you owe the government. But you will lose the extra $500 that you could have claimed if you owed more than $1,000 on your tax bill.

2. Forgetting to Adjust Withholdings

Michael Eckstein, owner of Michael Eckstein Tax Services in Huntington, New York, says that new parents need to adjust the amount of money that their employers withhold from each of their paychecks for taxes.