New Parent Tax Credits & Savings Guide for 2026
Why does no one teach you this stuff?
Bringing home a baby changes everything.
Your sleep. Your body. Your marriage. And…. your finances.
Before you factor in school, extracurriculars and, even, food, your budget can balloon literally overnight. Diapers. Groceries. Endless clothing rotation. Baby gear. It’s a lot.
But, there are definitely some financial perks too. They don’t show up on your insta feed like that trendy new stroller you can’t live without (can you?) and they don’t teach them to you in your parenting classes (should they?), but they can genuinely move the needle for your family. The good news is that most of them are surprisingly simple if you know what to look for.
This isn’t a CPA lecture. It’s the stuff I wish I was Googling at 2 am instead of swaddles.
Also, just a reminder that this is general information meant to be helpful, not personalized tax advice. Every family’s situation is different, so be sure to check in with your CPA or tax professional for the most up to date guidance specific to you.
Start With the Boring (But Important) Part
Apply for Your Baby’s Social Security Number ASAP
You can usually do this at the hospital when you apply for your baby’s birth certificate. If you skipped that step in the newborn haze, it’s worth circling back now.
You’re gonna need your baby’s Social Security number in order to:
Claim them as a dependent
Unlock major tax credits
Open savings accounts in their name
Set up certain investment accounts
Apply for their passport
Make Sure You Can Actually Claim Your Baby
This sounds obvious. Of course they’re your baby.
But the IRS has specific tests around:
Relationship
Residency
Support
Citizenship
For most new parents, your newborn will qualify as a dependent, but if you share custody, live in a multigenerational household, or have unique circumstances, it might not be as straightforward. The IRS website is the most reliable and legitimate source of information for this. I recommend starting there and copying any parts you don’t understand into Chat GPT, so you know the information you are getting is accurate.
Claiming your child isn’t just symbolic. It unlocks meaningful tax benefits.
The Big One: Tax Credits for Parents
When you hear “tax credit,” lean in.
Unlike deductions, which only reduce your taxable income, credits reduce your tax bill dollar-for-dollar. So if you qualify for a $1,000 tax credit, your tax bill goes down by $1,000.
Here are the big ones to know:
The Child Tax Credit
Parents may qualify for up to $2,200 per child.
That’s not nothing. For many families, it’s the difference between stress and breathing room. And all you have to do is file properly.
The Child and Dependent Care Credit
If you’re paying for daycare so you can work, part of those costs may qualify for a credit.
Childcare is already wildly expensive. Don’t leave money on the table!
Look Beyond Credits
There are other ways to be strategic this season that don’t always get discussed in mom groups.
Medical Expense Deductions
Childbirth and infant care come with real costs. Certain out-of-pocket medical expenses may be deductible depending on your income and total medical spending.
So make sure you save those receipts!
Certain Gifts Are Tax-Free
If grandparents (or others) want to contribute financially to your child’s future, there are structured ways to do that without triggering gift taxes.
Gifts are tax free up to the annual exclusion (per person): In 2026, this means that Grandma, Grandpa, Auntie, neighbor, anyone can each gift $19,000 without filing a gift tax return.
This money can go directly to the child in an account in their name, or even in the parents checking account - as long as the gift is clearly intended for the child.
529 Education Savings Plans
If you’re thinking long-term, 529 plans allow money to grow tax-advantaged for education expenses. Some states even offer state tax benefits for contributions.
You don’t have to go big. Starting small and early matters more than perfection. Just make sure you invest the principal! Vanguard has a really simple platform for set up, contributions, and investment portfolios.
Custodial Roth IRA
This is one of the most powerful tools to leverage if your kids has earned income - meaning money from a real job (modeling, babysitting, washing cards, helping the family business) that is properly documented and taxed. With this play, a job becomes more than valuable life experience - it’s potentially an 18 year head start on retirement. For business owners, this hiring you kids can unlock double tax advantages. It’s a write off for you and it grows tax free for them. $7,500 (Roth IRA limit) a year tax free can compound dramatically if you start young.
Flexible Spending Accounts (FSAs)
If you or your spouse have access to a healthcare FSA through work, those pre-tax dollars can help cover eligible out-of-pocket medical costs, including certain pregnancy and infant-related expenses.
You’d be amazed at what you can get covered with your FSA account.
A New Option: The “Trump Account”
There’s also a newer government-backed savings account option parents are starting to hear about called a Trump Account.
Here’s what to know:
If your child is under 18 and has a Social Security number, they may be eligible.
Babies born after January 1, 2025 may qualify for a $1,000 government contribution through a pilot program.
Starting July 4, 2026, families may be able to contribute up to $5,000 per year toward their child’s future.
While contributions are not tax deductible, qualified withdrawals are once the child turns 18.
This is potentially a great opportunity for families who aren’t able to open a Custodial Roth IRA to reap the benefits of an IRA. If you’re the type who likes to stack opportunities, this is definitely something to keep on your radar as guidance continues to evolve.
All parents with babies born after Jan 1, 2025 should sign up and claim their free money - even if you never make another contribution !
The Emotional Part No One Mentions
Here’s the truth.
In the early months of motherhood, I was not thinking about tax credits. I was thinking about sleep regressions and whether I’d ever shower again.
But, in a society that can often seem stacked against us, there’s something empowering about understanding the systems that do exist to support families.
We advocate for safer food, cleaner products, better diapers.
We can also advocate for our family’s financial health.
It doesn’t have to be complicated. It doesn’t have to be perfect.
Just start with:
Social Security number
Claim your dependent
Ask about credits
Consider long-term savings
That’s it.
You’re already doing the hardest job in the world.
This part? It’s just paperwork.
FAQ
Can I claim my newborn on taxes?
Yes. You can claim your baby as a dependent for the entire tax year they were born (even if they were born on December 31).
To claim your newborn, you generally need:
A Social Security number issued before you file
The baby must live with you (temporary hospital time counts)
You provide most of their financial support
Claiming your newborn can unlock credits like the Child Tax Credit, the Child and Dependent Care Credit, and potentially the Earned Income Tax Credit depending on income.
How much is the Child Tax Credit in 2026?
For the 2026 tax year, the federal Child Tax Credit is up to about $2,200 per qualifying child under age 17.
Up to $1,700 of that may be refundable, meaning you could receive it as a refund even if you owe little or no tax.
Income phase-outs typically begin around $200,000 (single) or $400,000 (married filing jointly).
Do babies qualify for tax refunds?
Yes - sort of. Babies themselves don’t get refunds, but having a baby can increase your tax refund.
This happens because:
Part of the Child Tax Credit is refundable (Additional Child Tax Credit)
Credits can exceed the taxes you owe
Other credits (like the Earned Income Tax Credit or childcare credit) may also apply
Eligible families can receive up to about $1,700 per child as a refundable credit if requirements are met.
What savings accounts can I open for my baby?
1. 529 College Savings Plan
Tax-advantaged growth for education
Can be used for college, some K-12, and certain training programs
2. Custodial Accounts (UGMA / UTMA)
Investment account in your child’s name
No tax-advantages, but can be used for anything
Assets legally become the child’s at 18
3. High-yield savings account in your child’s name
Simple place to save cash gifts
Low risk, easy access
4. New child investment accounts
Trump Accounts are investments accounts for all American children under 18 that grow tax-deferred
The government will deposit $1,000 in every account for babies born between January 1, 2025 and December 31, 2028.
Enroll your child by making an election on the new IRS Form 4547. Launches July 5, 2026.