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U.S. Tax Checklist On Having A Child

September 24, 2018

During the excitement of having a baby, many parents, often forget certain critical issues, which should be taken care of before the baby arrives.  This helps to ease the implementation process when the time comes, and enables the parent to divert all the attention towards the newborn.

The following is a checklist that should prove handy for expecting parents to address income tax, financial, legal, and government issues.


Steps To Take When Expecting A Baby in U.S.


Prepare To Apply for a Social Security Number (SSN) or Individual Tax Identification Number (ITIN)

A child born in the U.S. or a child born in a foreign country to U.S. citizens is eligible for a Social Security Number (SSN). The SSN is an identification number for U.S. citizens and residents (adults and children). It is required for various purposes, such as tax-filing, obtaining government benefits, medical benefits, open bank accounts, etc.. Parents need to fill out an application form to obtain a Social Security number (SSN).

Children, who do not qualify for SSN, but qualify as dependents of U.S. taxpayers, may need to obtain an ITIN (Individual Taxpayer Identification Number).  In certain cases, a child may be required to file a U.S. federal tax return. For example, if a non-resident alien individual lives in the U.S. and establishes a trust with the child as the beneficiary. Then, the child may need an ITIN to file a tax return to report the trust.

If you are going to adopt or have adopted a child, consider applying for an ATIN (Adoption Taxpayer Identification Number). An ATIN is issued by the IRS as a temporary taxpayer identification number for the child in a domestic adoption where the adopting taxpayers do not have and/or are unable to obtain the child’s Social Security Number (SSN).

Request for Leaves from Employer

As new parents, both the parents will need to make time to attend to the newborn. It is best practice to request time-off from your employer in advance, so that the employer can make appropriate substitute or alternate arrangements. Certain employees in the U.S. are eligible for paid leaves at the birth or adoption of a child under the Family and Medical Leave Act (FMLA). The FMLA is a U.S. labor law, which requires covered employers to provide certain employees paid leave for qualifying reasons, such as pregnancy, adoption, family illness, and several other family reasons.

Check Employer Benefit Plans for Employees

Some employers provide their employees with benefits related to a newborn or adopted child. For expenses, such as dependent care, or adoption-related expenses, some employers may pay up to $5,000 annually for dependent care costs per paycheck basis or set-up a dependent care flexible spending arrangement (FSA). The employee can make pre-tax contributions up to $5,000 annually.

Some large corporate employers also provide assistance with the expenses incurred in adopting a baby.

Check Your Protection Policies

If you have group or private protection policies, such as disability, and life insurance plans, you may want to check with your insurance provider about updating the beneficiaries of your life insurance policies, and apply for an increase in the monthly benefit amount of the disability insurance policy(ies). Likewise, you may consider doing the same for annuity contracts, retirement plans, or IRAs to include the newborn.

Obtain Health Insurance

You should include the newborn as a part of your health insurance plan.  A new parent should discuss with the insurer about the process to include a newborn, time-frame, and paperwork necessary. Also, inquire about the acceptable alternate documents if in case certain documents are in application process, such as SSN. Generally, once this done, the plan covers the baby’s medical costs retroactively from the time of birth.

At an early stage, check your health insurance plan’s terms and conditions, and whether it covers complications in pregnancy, and other such issues. Since, you may want to be financially and medically prepared from all sides before proceeding with having a baby.

All family members should have minimum health insurance coverage.  If you have group health coverage through your employer, speak to your plan administrator, HR department, or other person in charge of this employee benefit. If it is a government-provided marketplace health plan, you can consider enhancing the policy to include your newborn within a 60-day enrollment period. However, the benefit applies retroactively.

Check Tax Benefits for New Born

  • Child Tax Credit

From tax year 2018 onward, under the Tax Cuts and Jobs Act (TCJA), the dependency exemption has been eliminated for federal income tax, however, taxpayers have an increased standard deduction limit of $24,000 for joint filers who are married. Furthermore, the ‘Child Tax Credit’ (CTC) amount has also been increased.  If the taxpayer has a child below age 18, they can claim a $2,000 credit per qualifying child, of which $1,400 is refundable depending on the income level.

Another, $500 nonrefundable credit can be claimed for a qualifying disabled dependent, who is above twenty years of age but living with and supported by parents.

Phase-out limits were also increased allowing more taxpayers the ability to claim the CTC.

  • Dependent Care

Working parents may take a tax credit for child care expenses for a dependent under age 13. The credit is also available if you paid for the care of a spouse or a dependent of any age who is physically or mentally incapable of self-care.  To qualify, you must be working or looking for work.

 To calculate the tax credit, taxpayers can use up to $3,000 of expenses for one person  ($6,000 for more than one person) . The credit is a percentage applied to eligible expenses to determine the credit.  The percentage ranges from 35% to 20%, depending on adjusted gross income (AGI). The higher your income, the lower the percentage.

You must provide the name, address and Taxpayer Identification Number (TIN) of the person who provided the care. The taxpayer ID number is either a Social Security number (SSN) or an Employer Identification Number (EIN). Ask your care provider for the number.  Payments made to an individual, who is an immediate family member, such as a spouse or the taxpayer’s another child below age 19, or any claimed dependent are not eligible for credit. Payments made to family members, such as grandparents or any other relatives,  are eligible provided the person reports it as income on their income tax return. Be aware, that if the hired person takes care of the child in the parents’ home itself then the parents qualify as employers from tax viewpoint and could be liable to ‘nanny tax’.

  • Earned Income Tax Credit (EITC)

To qualify for EITC you must have earned income from working for someone or from running or owning a business or farm and meet basic rules. You must either meet additional rules for workers without a qualifying child or have a child that meets all the qualifying child rules.  The child must have a SSN.

The EITC ranges from $519 to $6,431 in 2018 and depends on the amount of family income.  The EITC is not eligible to taxpayer’s earning high AGI.  For example, for the tax year 2018, AGI must be less than $15,270 for single taxpayers with one child.  Married taxpayer’s with 3 or more children will not receive an EITC if their income exceeds $54,884 in 2018.

Check and Start Education Savings Plan

Education in U.S. is highly expensive. Starting education savings early for your children could prove to be a great way to build these assets. If you wish to save for your children’s education, you may consider some of these tax-saving education plans:

529 Plan

IRC section 529 plans cover tuition and fees for higher education or can be used for a variety of college or graduate school costs. Furthermore, from tax year 2018 onward, some percentage of the savings may be used for primary and secondary school.

Contributions made towards a 529 Plan are not deductible for tax purposes, however,  the income earned in a 529 Plan are tax-deferred.  That is, it is not subject to taxes until savings are withdrawn for education funding purpose. Distributions for qualified education costs are tax-free, including distributions up to $10,000 for primary and secondary school starting in 2018. The 529 Plan savings can be transferred tax free to another beneficiary.

Coverdell Education Savings Annuity (ESA)

A Coverdell ESA can be established for someone under the age of 18, or for a person of any age with special needs. Contributions into a Coverdell ESA can be made until the child reaches age 18, and can be made by anyone – parents, grandparents, relatives, and even friends. Once again, there is not deduction for contributions.  Earnings in an ESA grows tax-deferred and distributions for qualified education expenses are tax-free.

The benefit to an ESA is that funds may be used for ANY education cost, including kindergarten, prep school and tutoring.

Having said that, parents could also consider other saving options, such as saving bonds, which may be purchased and allowed to grow until the child(ren) enter their higher education years. Tax review is critical during any life-changing event, whether it is marriage, separation, the birth of a baby, or  even a new job. For more personalized tax measures, it is highly recommended that the taxpayer consults a tax professional.



If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax.

Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.

We can assist with:

  • Canadian Personal and corporate tax returns
  • Cross Border Taxation and Business Planning
  • Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

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With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
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With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1

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