I think every woman hits a point in her life when she begins to feverishly think about babies. Whether it is having a child of your own or adopting a child the thought is never ending. Your heart beat ticks stronger as you begin to pick out possible names, think about the color scheme you would like to have in the nursery, and all those wonderful baby showers that are sure to come.

When the baby fever begins to set in it is hard to cure. Seemingly every commercial on TV is about a baby, all your friends are either pregnant or trying to have a baby, and everywhere you turn there is a beautiful baby making eyes at you.

Let’s face it though, babies are expensive. I’ve had many friends who have said, “it’s only been 2 months and our budget is sky-rocketing. First it is the medical bill, and then all those diapers!” Adjusting to a new life as a parent has enough ups and downs that worrying about your finances shouldn’t be a concern.

Luckily the IRS, who normally steps in and takes a good chunk of your income every year, has some fantastic tax benefits associated with children.

I am not a CPA, so please consult with your CPA for more specifics on these issues, however below are 4 great tax benefits you should be aware of (please note some amounts are for 2007 as the 2008 rates have not yet been released):

1. Basic Exemption: For each child that lives with you, you can claim a $3,300 exemption (for 2007), provided your income does not exceed a predetermined amount.
2. Adoption Credit: For a child under the age of 18 you can claim an adoption tax credit in the amount of $11,650 (for 2008) for qualified adoption expenses.
3. Child Tax Credit: If you support children under the age of 17 you can claim a $1,000 (for 2008) tax credit per year per child, provided you are within income guidelines.
4. Child Care Credits: If you pay your baby-sitter or a day-care center by check and keep accurate records you can claim a child care credit. For 2007 the credit ranged from $600-$1,050 for each child depending on your income.

Having a baby does not have to spell disaster for your finances. If you are expecting or have a new baby you should consult with your CPA and your financial advisor to devise a strategy to “baby-proof” your finances.

For more information on tax benefits for children visit http://www.irs.gov.

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