Written by the Progyny Editorial Team — September 2025.
You have a lot on your mind as you prepare to welcome a new child into your family — through birth, adoption, or other paths.
One task to remember: update your payroll tax withholdings at work to add your dependent child. This can add income to your paycheck. And you may be eligible for a child tax credit. More money for you and your little one!
Plus, it’s so important to be sure you’re paying the right amount of taxes after welcoming a child.
Payroll tax deductions
When you were hired, you filled out a W-4 form to set your income tax withholding (how much your employer sets aside to pay federal taxes on your behalf).
After having or adopting a child, updating your W-4 form can help you qualify for tax breaks. You can find the W-4 form on your company’s intranet or ask human resources. Be sure to read the instructions and worksheet that comes with the form.
- If you don’t withhold enough tax, you may have to pay a high tax bill later. There can be penalties, too.
- If you withhold too much in taxes, you’ll get a tax refund later. But you could have earned interest on that money.
Adding a child (dependent) on your W-4 can lead to tax savings. Your paycheck will have less tax withheld, so your paycheck will be larger.
Child tax credit
The child tax credit is a tax break for eligible families.
You may qualify for this credit if your income is less than $200,000 (or less than $400,000 if you file a joint return). If you have a higher income, you might be eligible for a partial credit. Learn more about child tax credit eligibility from the IRS.
You can claim the child tax credit when you file your income tax return. And adjust your W-4 form to reflect this in your paycheck.
Child and dependent care tax credit
The child and dependent care tax credit is a tax break for families that pay for childcare while they work. The credit is for children under 13 or adults who cannot care for themselves.
The amount of the credit is based on your income and childcare expenses. In 2024, the maximum expenses you could claim was $3,000 for one dependent, or $6,000 for two or more dependents. You’ll use IRS form 2441 to file for this credit when you file your income tax return.
Adoption tax credit
The adoption tax credit is a credit for qualifying adoption expenses. Details change over time so be sure to research the latest. Also find out if your state offers additional adoption tax benefits.
In 2024, the maximum adoption tax credit is $16,810. If you received employer-provided adoption benefits, you can exclude up to $16,810 from your income.
If you make $252,150 or more, you can claim a lower amount. And if you make $292,150 or more you are not eligible. These numbers may change over time. You’ll use IRS form 8839 to file for this credit when you file your income tax return.
Tax-advantaged accounts
If your employer offers a pre-tax spending account for medical or childcare expenses, this can help you save. Your employer may add money to some of these accounts, as well.
Common accounts include:
- Health Savings Account (HSA). An HSA is like a personal bank account for medical expenses. The money you contribute is pre-tax, so you’ll get tax savings. The funds roll over every year — it’s your money to save, invest, and use until you retire.
- Flexible Spending Account (FSA). An FSA is an employer-owned account for medical expenses. The money you contribute is pre-tax, so you’ll get tax savings. But the money may expire at the end of the year.
- Dependent Care Flexible Spending Account (DCFSA). A DCFSA is an account for dependent services like preschool, summer day camp, before and after school programs, and child or adult daycare. The money you contribute is pre-tax, so you’ll get tax savings. But the money expires at the end of the year.
Read this article on tax-advantaged accounts for more information.
Remember, your Progyny Benefits Specialist is here to support you with any questions or help you need along the way.
Disclaimer: The information provided by Progyny is for educational purposes only and is not financial advice. Always consult a qualified professional for financial guidance.