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I%26#039;m expecting a baby in August. My home loan has been approved and I%26#039;m house hunting right now.





I%26#039;m single and usually my employer withholds about 1/3 of my paycheck for taxes because I have nothing to claim. Usually I get around $1000 back.





Should I adjust my witholdings?





I%26#039;d rather have the cash now and pay a balance due on my taxes at the end of this year. Plus, I%26#039;m going to get an 8k tax credit for buying a home with 20% down this year.



Not to sound morbid, but I%26#039;d hold off on modifying your withholdings until the little one arrives and takes his first breath.





One of the most gut-wrenching things I ever had to do was tell the parents of a still-born baby (and close friends of mine) that they were going to owe a few thousand at tax time because they jumped the gun on adjusting their withholdings in the expectation of the new addition to the family.





If you typically get $1,000 back you are having too much withheld from you pay. You can safely kick your allowances up by 1 right now. Then when the baby is born, kick it up by 2 more.





As soon as you close on the home you can amend your 2008 return and get your $8k in a few weeks. This won%26#039;t affect your withholding allowances on your 2009 pay.




Yes, you should adjust your W-4 allowances. In fact you may want to claim a very high number since the $8,000 tax credit for your house is likely to reduce your tax liability to nothing. Just don%26#039;t count your chickens before they hatch, don%26#039;t assume you%26#039;re buying a house until its officially closed.


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