Life Changing Events Can Affect Your Taxes

As a tax preparer, we get a lot of calls from clients when they have life-changing events. Sometimes, the event affects their taxes and sometimes not. Some of the questions from this tax year might be relatable to others.

Good news / Bad news regarding a new baby and daycare –

A client had a new baby girl on 15 December and asked if the baby would be counted for the full year as a dependent. Yes! Even if the baby was born on 31 December, she would count as a dependent for the entire year. This same client then wanted to know about daycare and tax deductions as she was going to be returning to work at the first of the year. She wondered if daycare would be tax deductible. This answer depends on the type of daycare. In this instance, the grandmother was going to take care of the new infant. And so, in this case, the daycare, provided by a family member is not tax deductible.

So the good news was while the client was happy to learn that she would receive full credit for the new dependent, she was a little disappointed that paying her grandmother to care for her newborn would not be tax deductible. The other good news is I’m sure her daughter is in great loving ands with Grandma.