What tax benefits do I get when I have a baby in 2025?

Having a baby opens up several valuable tax benefits starting in the year the child is born, even if born on December 31.

Child Tax Credit (CTC): You can claim up to $2,000 per qualifying child under age 17. The credit begins to phase out at $200,000 AGI for single filers and $400,000 for married filing jointly. Up to $1,700 is refundable as the Additional Child Tax Credit (ACTC) for 2024, meaning you can receive it even if you owe no tax.

Dependent exemption and standard deduction: While personal exemptions are suspended through 2025 under the TCJA, claiming a child as a dependent still unlocks credits and deductions. Your child needs a Social Security Number to be claimed as a dependent. Apply for one using Form SS-5 at the hospital or SSA office.

Child and Dependent Care Credit: If you pay for daycare, a nanny, or preschool so you can work or look for work, you can claim a credit of 20-35% of up to $3,000 in expenses for one child ($6,000 for two or more). The maximum credit is $1,050 for one child. This is separate from the employer Dependent Care FSA.

Dependent Care FSA: If your employer offers one, you can contribute up to $5,000 pre-tax ($2,500 MFS) for childcare expenses. This reduces both income tax and payroll tax. You cannot use the same expenses for both the FSA and the Child and Dependent Care Credit.

Earned Income Tax Credit: Having a qualifying child significantly increases the EITC. For 2024, a family with one qualifying child can receive up to $4,213, compared to only $632 with no children. Income limits also increase substantially.