will having a third child get more earned income tax?

Question

i have been told a few different things. i had a baby in 2005 but her dad claimed her last year. this year i will be claiming her plus my other two children. all the tax book just tell youthe earned income for up to two children. has anyone ever prepared taxes and know if i would be better off letting her father claim her again this year or should i calim her. thanks

Answer 1

The maximum earned income credit is based on two children. The tax book you are reading is correct. You will use form Schedule EIC, and there are only places for up to 2 children.
http://www.irs.gov/individuals/article/0,,id=96406,00.html

If you claim your baby for 2006, and your other 2 children, you will have three dependants instead of two. You will be allowed an extra exemption allowance of $3,300. There is also a credit called the Child Tax Credit, which could reduce your tax liability by $1000 per child, so the baby is eligible for it's own $1000 credit. $3000, altogether instead of $2000 with two children.

Also, if you itemize, you may be able to deduct child care, the child's medical bills, and some maybe other expenses associated with your 3rd child.

If your tax liability goes to zero, there is a credit called the Additional Child Tax Credit, that can be refunded to you even if you owe no taxes.

It will probably be a benefit to you to claim your baby because of the extra allowances, deductions, and credits you can receive, but it depends on your income, and your overall tax liability.

If your tax liabiltiy goes to zero without claiming your baby, you won't owe any taxes. You will be getting the EIC, plus a refund of your withholdings. In a case like that, then you really don't need all the extra deductions and credits. In a case like that, it might be a good idea to let the baby's father claim your 3rd child, so that he gets a larger refund. What some people do, is make a deal between themselves. You could say to the baby's father, I'll let you claim the baby, but since your refund will be larger this year, let's split it, and give me a share of the extra refund amount. This is perfectly legal as long as the baby is his qualifying child as well as yours.

So really, the best thing to do is to compare:
1. Look at what your refund (or balance due) is claiming 2 children
2. Do another 1040 form, look at what the refund is claiming three children. If your refund is larger claiming the 3rd child, then you probably want to do that.

Otherwise, there is one more thing to look at:
3. Look at the baby's father's return, (sit down together and compare notes) and see how big the refund is if he doesn't claim the baby, and then if he does claim the baby. Maybe claiming the baby allows him to file as head of household. Maybe by claiming the baby, his refund changes dramatically, and goes dramatically higher. He may go from having a balance due, and owing money, to getting a nice size refund. Then, maybe the thing to do is let him claim the baby, and ask for a portion of the much larger refund. He will probably be very happy to make a split like that.

After looking at this all ways, decide which gets your the most money, and what is best for you.

Answer 2

Nope, and that should not be a reason to have a baby. But did you also know that if her dad cannot use extra earned income due to his salary, you can still claim the earned income if she lives with you? I have 2 kids, I let my x claim one (because I am a nice person :)), but he makes too much money to use the EIC, so even though I let him claim one for dependent to help him, physical custody is with me, and I can still add him to my EIC. Well, he is 19 now, so last year was the last year I could do that. Check out if her dad qualifies for EIC. And, it is also retroactive.. so if you can do that, you can go back and claim the years that you did not file EIC...

Answer 3

no it doesn't work that way, it is based in your earned income and having another child in the household increases the amount but certainly not be $1000 you are probably referring to the child tax credit of $1000 for each child in the household under 17 that is a credit to reduce your income tax, it is not a refund at this point anything of that child tax credit not absorbed in reducing the income tax liability is then an additional child credit and will depend on how much was used to reduce the income tax

Answer 4

I have prepared taxes for a few years. I also have 4 kids. Your income refund will not get any bigger using more then 2 kids. I also let my ex claim 2 since he is behind in support, any refund he gets goes straight to me (the kids).
I believe the only way your refund might increase is if you have child care expenses for the children. That might increase your child tax credit but if you don't have child care expenses that won't do you any good.

Answer 5

EIC is only up to two children. Adding a third will not increase the EIC from two.