Monday, January 16, 2017

January Babies

As I come to the final few weeks of pregnancy with our third child (a third boy of course), I have been wondering about those people who hope to have the "first baby of the year". I was a bit disappointed not to have a December baby (obviously, I hope he bakes long enough to be healthy) when I ended up in the hospital shortly after Christmas and thought about all the benefits of having a baby in December rather than January. He was pretty close to being fully cooked, so he probably could have avoided a long stay in the hospital, so I thought about all the benefits and drawbacks of December versus January babies.

Sure, you have to deal with the whole present/party issue (who can come to the birthday party when they are traveling out of town and who wants to buy two presents when it is only a few days apart). However, there are some huge financial benefits the 1st year for babies born in December.

1) Deductibles start over in January. This will be a big one for us this year. Since I'm expecting in January, I can already expect to hit the several thousand dollar deductible for 2017. Unfortunately, we've also hit the several thousand dollar deductible for 2016 due to those pesky pregnancy issues requiring hospitalization. So, if the baby had been born (and released from) the hospital in December instead of January, we would have easily saved at least $3,000.
2) Child tax credit. This is a big one, for most taxpayers it's an extra $1,000 refund on their taxes, of course, if your child is born in January, you have to wait until the next tax year compared to a baby born in the previous December.
3) Personal exemption. You also miss out on the personal exemption of $4,050 (for 2016). Assuming a marginal tax rate of 15%, this deduction could save another $600 or so.

So, let's add up those additional expenses and missed savings for Baby # 3... Total cost of a January baby versus a December baby - $4,600. Those "First Baby of the Year" prizes had better be pretty hefty in my opinion.

Needless to say, I'm not all that disappointed that our particular January baby was not born in December. Obviously, a NICU stay, asthma, or any other long term problems that many premature babies face is more costly than the $4,600 difference. But, if you are planning for a baby, I strongly suggest aiming for the end of the year rather than the beginning of the year. You know, if you can plan those types of things.
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