When is the latest date a child can be born in the tax year to qualify as your dependent for tax purposes? You might be surprised by the answer: December 31. It's possible to claim your newborn as a dependent as long as it's documented as a live birth and 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.
- You can claim your child as your dependent if they were born at any time during the tax year, but some other rules can complicate the matter.
- Your child must live with you for at least half the year or from their moment of birth if they're a newborn, but this includes time spent in the hospital.
- The IRS applies tiebreaker rules if both parents want to claim the baby, but they're not married, so they can't file a joint return.
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 tax 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. Children who are born or die during the tax 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.
The situation changes if the child is placed in foster care or for adoption. They've left 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 goes straight 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.
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, 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.
- The child cannot have provided more than half of their financial support for the year.
Does It Still Matter in 2022?
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 eliminates the personal exemption that used to be available for each of your dependents, at least through 2025, when the law potentially expires.
But the Earned Income Tax Credit, the Child Tax Credit, and the Child and Dependent Care Credit are all still alive and well. Having a dependent is critical to qualifying for each of them.
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 tax year 2021, the return you'll file in 2022.
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. This won't apply in tax year 2022, however, unless Congress takes steps to renew this provision of legislation.
Your dependent might help qualify you for the head of household filing status 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?
You'll receive a notice from the IRS letting you know if more than one taxpayer submits a return claiming the same qualifying child. You'll have the opportunity to ensure your return was correct. You'll have to file an amended return and pay any taxes that are due if it wasn't.
What is the child tax credit?
The child tax credit is a credit equal to a dollar amount for each of your qualifying children. Half the total credit amount was paid in advance monthly payments in 2021. You must reconcile these payments and claim anything more that's due to you when you file your tax return for the year in 2022. The credit is also fully refundable in 2021. The credit will revert to its 2020 amounts in 2022 unless further legislation is passed.