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Posted by: Maricopa Lawyers on Aug 16, 2013

Would Americans have babies early to save on taxes? Anything is possible.

Many people go completely out of their way to land big savings each year, cutting corners wherever possible. It probably doesn’t come as much surprise then that some people will even try to alter their unborn children’s date of birth in an attempt to receive additional tax benefits.

In a joint study with Sara LaLumia, the University of Chicago’s James Sallee and the Treasury Department’s Nicholas Turner, there’s enough evidence to suggest Americans are electing for earlier birth dates to save across their annual taxes. Many parents are discovering that certain tax incentives are one of the greatest influences in their decision to move forward with a pregnancy.

Researchers discovered some policies including the Child Tax Credit (CTC), the dependent exemption and the Earned Income Tax Credit (EITC, carrying greater benefits to families with additional children) are coercing many prospective mothers into January delivery dates. The early birth allows parents to roll such policies forward, and cash in on further tax benefits.

The phenomenon is not considered totally new. At least four separate and similar studies have been conducted in the past, studies that found parents willingly alter birth timing to capitalize on public tax and benefits. This recent study seems to back up the previous findings.

The current study examined the Social Security Administration database to determine the Social Security statistics for children born anywhere between 2001 – 2010. The compiled information was then used to contrast the tax returns containing SSNs during the year of the child’s birth. The margins of the study were later restricted to December 25th – January 7th.

Researchers discovered nearly 30% additional December births, some of which are parents electing to deliver early for additional tax incentives. While the evidence isn’t overwhelming, it’s enough to suggest people continually base many important decisions around the relative financial cost.