Tax Deductions for Giving Birth to a Child

The Dependency Exemption

Qualifying for the dependency exemption is a prerequisite to qualifying for the child tax credit. To qualify, you must be financially independent, meaning that nobody can claim you as a dependent on their own tax return, and the child must live with you. You must provide at least 50 percent of the child's support, but you may include in this amount child support payments provided by a non-custodial parent. The dependency exemption is $3,700 at the time of publication. You deduct this from your taxable income, not directly from your tax bill.

The Child Tax Credit allows you to deduct $1,000 from your tax bill for a dependent child until he reaches the age of 16. You cannot take the credit if your child is a non-resident alien. The IRS phases out this credit for taxpayers with a modified adjusted gross income (MAGI) above maximum levels based on filing status, beginning at $55,000. MAGIs are computed in various ways, depending on the purpose. See IRS Publication 972 for instructions on computing the MAGI for the Child Tax Credit.

If you itemize deductions, you may deduct medical and dental expenses you pay on behalf of your child to the extent that your total medical and dental expenses (for your entire family) exceed 7.5 percent of your adjusted gross income. Health insurance premiums are classified as medical expenses for tax purposes. You cannot deduct these amounts if you don't itemize your deductions. As a consequence, you cannot take the standard deduction and also deduct medical and dental expenses. At the time of publication, the standard deduction is $11,600 for married couples filing jointly and $5,800 for single filers and married taxpayers filing separately.

Non-custodial parents are generally not allowed to take the dependency exemption or the child tax credit even if they provide more than half of a child's support through child support payments. This restriction can be removed if a divorce settlement or legal separation agreement provides that the custodial parent will abandon these tax breaks in favor of the non-custodial parent. A non-custodial parent can deduct out-of-pocket medical expenses incurred on behalf of his child; however, he must have actually incurred these expenses -- he cannot deduct amounts paid by the custodial parent out of court-ordered child support payments that he provided.