February 21, 2013 : Issa Mas - Guest Contributor
Tax Tips for Single Parents: Don’t Overlook These Tax Breaks
Ed Note: Single parents have a unique set of challenges when it comes to filing taxes — but don’t overlook the perks available. For some tax tips for the solo mom or dad, we turned to the one and only Issa Mas, a.k.a. Single Mama NYC.
Filing taxes can be complicated, even if you have already been doing so for many years. As a single parent, especially if this is your first time filing as one, you probably have questions or concerns as to your filing status and what tax credits and/or deductions you might be eligible for.
Below are a few tax perks for the hardworking single parent:
1. File as “Head of Household”
Filing as “Head of Household” instead of as “Single” offers the single parent two benefits; first, in general, you will pay less overall taxes. Second, you will also be able to claim a higher standard deduction. You generally qualify as Head of Household if you were unmarried on the last day of the year, if you were the one who provided more than 50 percent of the financial support needed to maintain your household, and your children must have lived with you for more than 50 percent of the year or you maintain a home that is the principal place of abode for more than half the year for your father or mother who you can claim a dependency exemption for the parent.
2. The Dependent Exemption
Single parents who file as Head of Household for 2012 will be able to claim an exemption of $3,800 for themselves and each qualifying child against their taxable income and that can add up. If you have two children, that would reduce your taxable income by a total of $20,100. If you share equal custody with the other parent, you will need to determine which parent will claim the dependent exemption for each child.
3. The Earned Income Tax Credit
The Earned Income Tax Credit is a real benefit for low-income working people. The value of the credit is raised by the number of children you have, although having children isn’t even a requirement to benefit from the credit. Even if you did not earn enough money to owe taxes, you may still be eligible for a refund through the Earned Income Tax Credit. Keep in mind that this credit doesn’t mean that the lower your income, the higher your credit. You do have to earn a qualifying amount to get the maximum benefit from this credit. Single parents with low incomes almost always qualify for this credit.
4. The Child and Dependent Care Credit
This credit was created to refund up to 35 percent of what it costs to pay someone to take care of your child so that you can work or look for work. There are some restrictions, such as the child must be under 13, the caregiver cannot be the other parent, etc. This credit is also extended to the person filing if they are paying for the care for a non-child dependent who is unable to physically or mentally able to care for himself or herself, such as an elderly parent who lives with you. In order to qualify for the Child and Dependent Care Credit you must have actually earned an income during that year. This credit shouldn’t be overlooked, as it can add to the amount of the refund you receive.
The Child Tax Credit provides filers with up to $1,000 per qualifying child. Understand that a credit is different from an exemption because a credit is subtracted from the total amount of taxes that you owe. In order to qualify for the Child Tax Credit, each qualifying child must meet specific requirements, such as being under the age of 17 by the last day of the year, you must have claimed them as your dependents, and they must have lived with you for more than half of the year. To qualify for the refundable portion of the Child Tax Credit, the minimum amount of earned income you must earn is $3,000.
There may be other credits and exemptions you would qualify for, so if possible, be sure to consult with a qualified tax professional so that you can benefit as much as possible.
Want to discuss taxes & parenting? Visit us in the H&R Block Community and start the conversation.