Prior Planning Prevents Poor Performance

Every year at this time we see stories like this. 

Some Valley families rang in the New Year with brand new babies. Having a baby is a very special time for every family, but a few Valley moms got some extra attention because their bundles of joy came during the New Year.

I'm sure that people read those stories and think about new beginnings and little bundles of joy.  I read those stories and think...that's really poor tax planning. 

Every parent knows that they get to take an exemption for each of their dependents.  That exemption is the same amount no matter when in the year you have your child.  So couples who have a child in January don't get any tax advantages.  Of course, they have the child for the full year and get a full year's exemption, so they can't claim it's not fair...kind of like Calvinism.

Smart parents however, will have their children late in the year.  In fact, if I were still practicing accounting, I would warn my clients that it's fiscally irresponsible to have sex between April 1 and say, mid June. 

I have two children with summer birthdays and we really scored with one who was born December 6th.  That's the full year's exemption with only one month's investment.  I have a friend who was born on December 24th.  That's smart.

But the award for the smartest parents goes to Congressman Jeff Flake's parents.  Congressman Flake was born on December 31st.  That's a full year's exemption for a one day expense--a fiscal conservative from day one.   

Comments

[BobH]

Two kids: daughter, Dec. 9; son, Dec. 3.

[Aaron]

That's Funny!

[Gilbert_Sundevil]

I'm an accounting grad AND a terrible tax planner. 4 kids. Birthdays in Apr, Jan, Feb, and Sep.

I'm blaming the January birthday on the doctor. We asked for an induction but the Doc didn't want to. The kid was born on Jan 2nd and weighed in at over nine pounds. That bun was done in the oven long before Jan 2.

[DSW]

Arizona is also unique in that if a family loses a baby from a miscarriage after 20 weeks gestation, that family can claim that unborn baby as a dependent on that year's state income tax return. This may help assuage the cost of counseling and/or burial of that baby. Unexpectedly, Governor Napolitano signed that bill into law. I was fortunate enough to lobby for the bill which was sponsored by my state senator, the late Marilyn Jarrett.