Can You Claim Your Unborn Baby as a Dependent on Your Tax Return?
You can claim your newborn baby subject to certain rules
When is the latest a child can be born in the tax year to be your qualifying dependent?
It's possible to claim your baby as a dependent as long as she was born at any time during the tax year—even if it's 11:59 p.m. on the last day of the year. But if she waits until 12:01 a.m. on Jan. 1, you're out of luck...at least until you file that year's tax return. Because yes, she must be born before she can qualify.
A persistent rumor floats about that your baby must be at least six months old before you can claim her as a dependent. That's simply not true. But a lot of other rules do apply.
A Qualifying Child—The Residency Rule
Let's take a look at the overall criteria for claiming a qualifying child as a dependent. The first rule is that he must live with you for more than half the year. This might seem to rule out your New Year's Eve baby, but the Internal Revenue Code makes an exception for newborns. The exception also applies when a child dies during the year.
The Internal Revenue Service states in Publication 501 that:
"A child who was born or died during the year is treated as having lived with you all year if your home was the child's home the entire time he or she was alive during the year. The same is true if the child lived with you all year except for any required hospital stay following birth."
Let's read that again to capture its nuances. A child born during the year "is treated as having lived with you all year" provided that the child lived with you in your home for "the entire time he or she was alive during the year...except for any required hospital stay."
In other words, your baby will meet the residency test because he will presumably have lived with you from his moment of birth on because even a stay in the hospital is considered to be living in your home.
Of course, if the child is placed in foster care or up for adoption and leaves your care, that changes things. Another exception would be if his other parent immediately took custody of him and you don't also live with that parent. And in this case, a whole new batch of rules applies.
The "Tiebreaker" Rules
The IRS provides detailed criteria for who gets to claim a child as a dependent when the parents are divorce or separated. They're called Tiebreaker Rules because they often come into play when both parents want to claim their child. Only one of you can do so.
These rules are something like a ladder. Parents must step from one rung to another until one of them qualifies. The first step or requirement is that the parent with whom the child lived most during the tax year gets to claim her. If she was born in November and immediately went home from the hospital with her other parent, that parent gets to claim her because she lived with him the entire time she was alive.
But what if this is a gray area? What if the baby really is born late on New Year's Eve so it can't be clearly determined who she lived with longest? In this case, the parent with the highest adjusted gross income (AGI) is entitled to claim her as a dependent. Yes, it will come down to which of you earns more.
Of course, all these rules assume that you're not married. If you are, you can both effectively claim the child no matter when or what time he was born during the tax year if you file a joint return.
Your baby will also qualify as your dependent more or less by default under the remaining IRS rules for qualifying child dependents. A dependent must be your son or daughter, brother or sister, or a descendant of one of these individuals. You've got this one covered if you've just given birth.
The child must be younger than age 19 on the last day of the tax year, or age 24 if she's a full-time student. He obviously qualifies here, too.
Finally, the child cannot have provided more than half his own financial support for the year. Unless and until child labor laws radically change, this should not be an issue.
Does It Still Matter in 2019?
You might have heard that having a dependent doesn't do you much good anymore, at least from 2018 through 2025, thanks to the new tax law passed by congress in December 2017. The Tax Cuts and Jobs Act of 2017 does indeed eliminate the personal exemption that used to be available for each of your dependents.
But the Earned Income Tax Credit, the Child Tax Credit, and the Child and Dependent Care Credit are all still alive and well, and having a dependent is critical to qualifying for each of them. And if you and your baby's other parent aren't living together, your dependent might help qualify you as head of household, an advantageous filing status.
So, yes, having a dependent is still a good thing at tax time, and yes, your newborn will qualify you if you meet these rules...even if she's born at the 11th hour of the year.