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When it comes to having a baby, there are some things that every new parent should absolutely know — like how to change a diaper or how to burp a baby after feeding. But beyond the basics of infant care, parents should also understand how to save money once their little bundle of joy arrives. After all, you want to spend the weeks and months after your baby’s birth basking in love — not worrying about your finances.
Tax Breaks for New Parents
If you’re a new parent, congratulations! You have just earned yourself a few new tax breaks! While these tax benefits generally do not outweigh the overall cost of raising and caring for a child, they do provide some relief for new parents who have more expenses as a result of their latest addition.
Here are some possible tax breaks:
- You can claim your child as a dependent, subtracting $4,050 from your income for your new son or daughter.
- Depending on your income, you could also be eligible for a child tax credit of up to $1,000 for each dependent child under age 17.
- If you are a working parent, you can claim a dependent care credit of up to $3,000 in expenses for one child (or $6,000 for more than one child), age 12 or under, for child care used to allow parents to work.
- If you meet the income criteria, you may also be eligible for the Earned Income Tax Credit, which is a tax credit for low and moderate income taxpayers.
- Single parents may be able to file as the head of household, giving them a larger standard deduction and a more favorable tax bracket.
- And a BONUS…If you are a Millennial parent (like me!) you probably have some student debt. Did you know that you can deduct up to $2,500 in student loan interest per year? For those of you with high interest private student debt (also like me!) this deduction could be significant.
There are additional tax credits available to parents as your child gets older and enters college, such as the American Opportunity Tax Credit and the Lifetime Learning Credit. You may also be able to employ your child if you own your business, shifting income and reducing your own taxes.
While having a child can be expensive, it is also one of life’s greatest joys. There are many ways that new parents can save money, from getting hand-me- downs from friends to taking advantage of tax breaks for their new baby.
More Ways To Save…It Takes A Village
When it comes to baby gear, chances are good that your friends and family members have attics, basements, and garages full of barely-used strollers, cribs, highchairs, and more. Rather than spending hundreds or thousands of dollars on these items, reach out to loved ones and ask if they’d be willing to part with their baby gear for free or low cost instead.
Most baby necessities, such as swings and rockers, do not expire and do not need to be brand new. They can easily be cleaned and are perfectly safe to be used for more than one baby (just remember to double check them). While it may be tempting to go out and buy brand new everything for your little one, remember that your little boy or girl will only be using each item for a few months — if at all — before outgrowing it. The better bet is to happily accept hand-me-downs from friends and family members, and save your money (and registry items) for things that can’t be safely passed down, like car seats.
The same goes for clothes. It is fun to shop for baby clothes, and buy cute little outfits, but in most cases, your infant may only wear something once or twice before he or she outgrows it. Your friends and family members will likely have plenty of clothes to pass down, most of which will be only gently worn. Instead of purchasing a whole new wardrobe of shiny new clothes for your baby, limit yourself to a few outfits for special occasions. For everyday wear, stick to hand- me-downs and gifts — you won’t be upset when the clothes get dirty or ruined by spit-up or food, and your loved ones will be thrilled to see the baby wearing something from them.
Just be careful when it comes to the safety of some used items, however. Car seats should not be handed down, as they expire, and may not hold up in an accident past their expiration date. Cribs with drop-down sides may pose a risk to babies, and certain toys with lead paint may be hazardous to teething babies. Thoroughly inspect all hand-me- downs before giving them to your baby.
To find out if any item is potentially recalled, you can go to www.safekids.org.
When it comes to saving money, one of the best ways that new parents can accomplish this goal is to make things themselves — at least when it comes to food. Breastfeeding is one example of how “DIY” can save you money by eliminating the cost of formula, bottles and nipples, but it isn’t always possible for all mothers. Working breastfeeding mothers will also have pumping-related expenses.
Most parents can save money by making baby food themselves once their babies are older. Steaming and pureeing fresh fruits, vegetables, meats, and grains is all it takes to make fresh, health meals for your little one — at a fraction of the cost of the store-bought baby food. For more on homemade baby food, check out these posts:
- 8 Tips for Fitting Homemade Baby Food Into Your Hectic Life
- 4 Reasons Why Making Your Own Baby Food Is Easier Than You Think!
Are you taking advantage of all the options available to you? Can you think of any others we didn’t include here? Comment below and share your thoughts!