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My question is, given what we know today, do I need to adjust my withholding to cover the capital gain or is the increase from the gain balanced by the addition of a child?

Do your taxes on 2008 forms with estimates for what you'll have for 2009.
And it'll probably be close enough for next April.

Or just take advantage of the "safe harbor" for withholding of having withheld 100% or 110% of your 2008 tax liability.

Either way you'll probably want to adjust your withholding - you'll need to submit a new W4 (and state equivalent if applicable) to your payroll department.

A short article about adjusting withholding:

PS: Congratulations. (BTW: I'm surprised you're telling people so early. Or is it just because you're quasi-anonymous here?)
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