• what to expect when you're expecting, having a baby, preparing for a new child

The Financial Benefits of Having a Child

You'll hear a lot about the costs of having a child, but there are also a few financial benefits. These include a number of possible tax breaks*, including:

  • Exemption deduction: As your dependent, each child counts as an exemption and an automatic $3,900 deduction on your federal income tax return. For a taxpayer in the 28% bracket, that's a tax reduction of nearly $1,000.
  • Child tax credit: In 2013, you may receive a $1,000 tax credit for each of up to two children, depending on your income level. Unlike deductions, credits reduce the amount of tax you owe dollar-for- dollar.
  • Child care tax credit: Uncle Sam will also cover part of the cost of your child care (if you and your spouse meet certain conditions): In 2013, you can receive up to a 35 percent tax credit on your first $3,000 in child care expenses per child, which would total $840 for a couple in the 28% tax bracket.

Combined, these three tax breaks would save this couple a total of more than $2,800 in taxes a year for one child.

In addition, many couples find that a child forces them to become more disciplined in their finances than they were before the baby came along. They keep closer tabs on their spending, shop more carefully, eat out and entertain less frequently, and spend less money on what they now consider "frivolous" items than they did before. And when they do splurge for a sitter and a night out, it usually seems so much more special!

*Based on current tax law, subject to change. You should consult your personal tax and/or legal advisor concerning your individual situation.

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