One income household with an infant. Why doesn't my wife count as a dependent?

[rjs]

Your spouse can never be your dependent. You can file a joint tax return with your spouse, even though she has no income.

[JeffreyR77]

Your wife is considered one of the taxpayers on the tax return by the IRS.  The status of the taxpayers on the return determines the most favorable filing status and your eligibility for various deductions and credits.

As your spouse, your wife qualifies you both for a much higher standard deduction amount than a dependent. 

Single taxpayer's Standard Deduction is $12,400, whereas with your spouse you are able to file as Married Filing Joint with a Standard Deduction of  $24,800.  You do not pay tax on $24,800 of income with this filing status.

With your infant you qualify for a $2,000 dependent tax credit, reducing any tax you have by up to $2,000.

Who Can Be a Dependent 

@gcruz006