You’re out of luck if they wait until 12:01 a.m. on Jan. 1 to arrive, at least until you file that year’s tax return. Because yes, your baby must be born to qualify. You can’t claim an unborn child…at least on your federal tax return. You can do so in at least one state beginning in 2023.

A Qualifying Child: The Residency Rule

The first rule for claiming a qualifying child as a dependent is that the child must live with you for more than half the tax year. This might seem to rule out your New Year’s Eve baby, but the Internal Revenue Code (IRC) makes an exception for newborns. The exception also applies when a child dies during the year. Children who are born or die during the tax year are considered to have lived with you at least half the year if your home was their home during their entire lifetime. Your baby will meet the residency test because they will presumably have lived with you from their moment of birth. Even a stay in the hospital is considered to be living in your home. But the situation changes if the child is placed in foster care or for adoption because they’ve left your care. Another exception would be if their other parent immediately takes custody of the baby and takes them home, and you don’t also live with that parent. A whole additional batch of “tiebreaker” rules applies in this case.

The “Tiebreaker” Rules

The IRS provides detailed criteria for who gets to claim a child as a dependent when parents are divorced or separated. They’re called “tiebreaker rules” because they often come into play when both parents want to claim their child. The IRC rule is that only one of you can do so. The first step or requirement is that the parent with whom the child lived most during the tax year gets to claim the dependent. If a baby is born in November and goes straight home from the hospital with the other parent, that parent gets to claim the child because they lived with them the entire time they were alive. But what if this is a gray area? What if the baby is born late on New Year’s Eve, so it can’t be determined who they lived with the longest? The parent with the higher adjusted gross income (AGI) is entitled to claim the child as a dependent in this case. It will come down to which of you earns more. These rules assume that you’re not married and living together. You can both effectively claim the child no matter when or what time they were born during the tax year if you’re married, live with your spouse, and you file a joint return.

Other Tests

Your baby will also qualify as your dependent more or less by default under the remaining IRS rules for qualifying child dependents.

A dependent must be your son or daughter, a brother or sister, or a descendant of one of these individuals. You’ve got this one covered if you’ve just given birth.The child must be younger than age 19 on the last day of the tax year, or age 24 if a full-time student. Your baby qualifies here, too.The child cannot have provided more than half of their financial support for the year.

Does It Still Matter for Tax Year 2022?

You might have heard that having a dependent doesn’t do you much good anymore, thanks to tax legislation passed by Congress in December 2017. The Tax Cuts and Jobs Act (TCJA) eliminated the personal exemption that used to be available for each of your dependents. You can no longer claim a personal exemption for your child on the 2022 tax return you’ll file in 2023. But the Earned Income Tax Credit, the Child Tax Credit, and the Child and Dependent Care Credit are all still alive and well. Having a dependent is critical to qualifying for each of them. You can qualify for the Earned Income Tax Credit without a qualifying child, but the amount of your credit will be significantly less than what you could claim with one or more children. So, yes, having a dependent is still a good thing at tax time. And yes, your newborn will qualify you if you meet all these rules, even if your baby is born at the 11th hour of the year.

A 2023 Update

After the overturning of Roe v. Wade, Georgia’s Department of Revenue announced that it will, in fact, allow individuals at least six weeks pregnant on or after July 20 through Dec. 31, 2022, to claim any “unborn child with a detectable heartbeat” as a dependent on their 2023 tax return. Unfortunately, you won’t file this return until 2024. Keep your eye on emerging legislation, both at the state and federal level, in 2023.