| Your child should have a social security number as | | | | If you have adopted a child, you can claim the cost |
| soon as possible. The reason for this is that you | | | | of adoption. If you have adopted a special needs |
| need to claim your children as dependents on your | | | | child, you can claim the maximum deduction, even if |
| income tax return and you have to provide your | | | | the adoption did not cost that much. |
| child's social security number on the return in order to | | | | There are several ways you can save by investing in |
| claim them. | | | | your child's college savings from early years on. While |
| You can file for a Social Security card for your child | | | | the federal government will not allow you to invest |
| at the same time you are filing an application for a | | | | this money tax free, some states will, and in both |
| birth certificate. It is standard procedure in many | | | | cases the funds grow tax free and are not taxable |
| hospitals to supply you with the Social Security card | | | | upon pay out if the funds are used for tuition in a |
| form along with all the other paperwork you must fill | | | | qualifying university or college. Another way is to put |
| out upon your child's birth. | | | | money into an ESA or Education Savings Account. |
| You are entitled to a full year's exemption, even if | | | | Again, the deposit is not deductible, but you can fund |
| your child was born on the last day of that year. | | | | the account at $2000 per year and the earnings are |
| Claiming a dependent on your return obligates you to | | | | tax free, as long as they are used for education. |
| file a new W-4 form, adding a dependent claim for | | | | Education Savings Accounts can also be used to fund |
| your child. You can also use the child credit on the | | | | high school and elementary school expenses. |
| W-4, and this will reduce your withholding even | | | | If you hire someone to babysit your child in your |
| further. | | | | home, the Internal Revenue Service will probably |
| If you are single, you might want to consider filing as | | | | consider you to be an employer and you will become |
| Head of Household. This filing status will give you a | | | | liable for Social Security and unemployment taxes for |
| larger deduction and should change your tax bracket | | | | the babysitter or nanny. You might avoid these taxes |
| status. To file as Head of Household, you must be | | | | if you hire a nanny service because the service is the |
| responsible for more than fifty percent of the | | | | employer. |
| support cost of the dependent child. | | | | |