Having a baby means eighteen plus years of expenses related to the care of that child as they grow and develop. The IRS offers a tax credit for parents who have had a baby during the tax year. This credit is worth $1,000 per child, as long as your income is less than $110,000 (joint filers) per year. At this income level, the credit starts phasing out.

Also, because your new baby is a dependent, you can claim a personal exemption of $4,000 for the current tax year. You may even qualify for a child-care credit if both you and your spouse work. This credit is a great option for parents whose employer doesn’t offer assistance with child care, such as a 125 Plan. A 125 Plan can also be called a dependent care spending account, in which you add money from your salary, before it is taxed, to pay for daycare. You are only allowed to claim either a tax credit or use your employer’s 125 Plan, which is generally the better option.