It may be the first baby of the year who grabs the media headlines but it's the last baby of the year who yields the tax savings. Babies born before the stroke of midnight this New Year's Eve could save their parents thousands on their 2008 returns.
"Mere minutes can mean major tax savings this New Year's Eve," said Amy McAnarney, executive director of The Tax Institute at H&R Block (NYSE: HRB). "Babies born on Dec. 31 provide parents with a retroactive tax exemption for all of 2008. To get that same tax break, parents of babies born after midnight on Jan. 1 will have to wait until they file their 2009 taxes -- in 2010."
In addition to an exemption worth $3,500 in 2008, new parents may qualify to claim two other credits that could further reduce this year's tax liability.
