When is the latest date a child can be born in the tax year to be your qualifying dependent? You might be surprised by the answer: December 31. It's possible to claim your newborn as a dependent as long as they were born at any time during the tax year—even if it's 11:59 p.m. on the last day of the year.
You're out of luck if they wait until 12:01 a.m. on January 1 to arrive—at least until you file that year's tax return. Because yes, your baby must be born to qualify. You can't claim an unborn child.
A persistent rumor floats around that a baby must be at least six months old before you can claim them as a dependent. That's not true, but a lot of other rules do apply.
A Qualifying Child—the Residency Rule
The first rule for claiming a qualifying child as a dependent is that the child must live with you for more than half the year. This rule 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. Children who are born or die during the year are considered to have lived with you at least half the year if your home was their home during their entire lifetime.
This rule also applies if the child lived with you all year except for any required hospital stay following their birth.
Your baby will meet the residency test because they will presumably have lived with you from their moment of birth. Even a stay in the hospital is considered to be living in your home.
Of course, the situation changes if the child is placed in foster care or for adoption and leaves your care. Another exception would be if their other parent immediately takes custody of the baby and takes them home, and you don't also live with that parent. A whole additional batch of rules applies in this case.
The "Tiebreaker" Rules
The IRS provides detailed criteria for who gets to claim a child as a dependent when parents are divorced or separated. They're called "tiebreaker rules" because they often come into play when both parents want to claim their child. The Internal Revenue Code rule is that 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 the dependent. If a baby is born in November and immediately went home from the hospital with the other parent, that parent gets to claim the child because they lived with them the entire time they were alive.
But what if this is a gray area? What if the baby is born late on New Year's Eve, so it can't be determined who they lived with the longest? The parent with the higher adjusted gross income (AGI) is entitled to claim the child as a dependent in this case. It will come down to which of you earns more.
Of course, all these rules assume that you're not married. You can both effectively claim the child no matter when or what time they were born during the tax year if you're married and 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 or a 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 a full-time student. Your baby qualifies here, too.
- Finally, the child cannot have provided more than half of their financial support for the year.
Does It Still Matter in 2020?
You might have heard that having a dependent doesn't do you much good anymore, at least from 2018 through 2025, thanks to tax legislation passed by Congress in December 2017. The Tax Cuts and Jobs Act (TCJA) that became effective in 2018 does indeed eliminate the personal exemption that used to be available for each of your dependents, at least through 2025 when the law potentially expires.
You can qualify for the Earned Income Tax Credit without a qualifying child, but the amount of your credit will be significantly less than what you could claim with one or more children, except in 2021. The American Rescue Plan Act of 2021 increases the maximum EITC for workers without dependents to approximately $1,500 in 2021 only in response to the coronavirus pandemic.
Your dependent might help qualify you as head of household as well. This is an advantageous filing status if you and your baby's other parent aren't married and living together.
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 your baby is born at the 11th hour of the year.
Frequently Asked Questions (FAQs)
What happens if more than one taxpayer submits a return claiming the same qualifying child?
If more than one taxpayer submits a return claiming the same qualifying child, you'll receive a notice from the IRS letting you know. You'll have the opportunity to ensure the return was correct. If it wasn't, you'll need to file an amended return and pay for any taxes that are due.
What is the child tax credit?
The child tax credit is a credit for each qualifying child. For 2021, half the total credit amount is being paid in advance monthly payments. You can claim the other half when you file your 2021 income tax return. The credit is also fully refundable in 2021. The credit will revert to its 2020 amounts in 2022 unless further legislation is passed.