Being a single mother is a tough task and when tax season comes around you can get rewarded for your efforts with multiple tax credits and tax benefits. This guide will list and explain all the possible tax breaks that you should know about and use on your taxes.
1. Personal and Dependent Exemption
One of the most common tax breaks for single mothers to use is the Dependent Exemption. This exemption means you are responsible for a child. For each child you claim as a dependent you get a $4000 exemption, meaning your taxable income is reduced by $4000. So if you have two children you would have $8000 off of your taxable income. You can claim this credit for each child until the age of 19, or until the age of 24 if he or she is a full time student.
Also you can take a personal exemption, which simply lowers your taxable income by $4000. So if you have two children that’s a total of $12 000 reduced off your taxable income. However, it is important to note if you are divorced and share the custody, only one of the parents can claim this credit. Whoever is officially the ‘custodial parent’ will legally be able to claim the child as a dependent. Basically this means the it goes to the parent that the child lived with for more than 50% of the year.
2. File as Head of Household
As a single mother you are clearly the head of household. A head of household officially means that you were unmarried on the last day of the year, and you supplied more than 50% of the finances needed to maintain your home and that your children lived in your household with you for more than half of the year.
Claiming as head of household will mean you will pay less taxes overall, and you will be held to a higher deduction standard meaning less taxes to be paid.
For the current tax year, you can claim $9250 to be deducted off your tax. Speak to an accountant or any free law help office in your area if you are unsure if you are officially the head of household.
3. Child Tax Credit
A child credit is even better than a tax deduction because with the credit it is the actual amount subtracted from the taxes that you owe. You can deduct $1000 off your taxable income for each child in your household under the age of 17. You do not have to be low income to use this credit as the credit is reduced by 5% of adjusted gross income for single parents up to a threshold of $75 000.
For a child to qualify under the child tax credit they must meet the following:
- lived with you for more than half the year
- did not provide over half of their support (living expenses) for the year
- child does not file a joint return
4. Additional Child Tax Credit
The Additional Child Tax Credit is available for those who didn’t receive the full amount of he Child Tax Credit. This credit is not completely refundable meaning if the Additional Child Tax Credit exceeds the amount of taxes you owe; you can receive a refund of 15% of your earnings that are above $3000. For example, if you made $17000 in one year, you will receive 15% subtracted by $3000 which is $14000, so it would end up being 15% of the $14000.
5. Child Care Credit
The Child Care Credit allows you to receive a tax credit if you paid someone else such as a daycare to care for your child while you looked for work or worked/attended school. The maximum dollar amount you can use for the expenses is $3000 or $6000 for two or more of your children you child care for.
To claim this credit your child must be under 13 years of age for at least part of the year. Furthermore, the person/organization who had the responsibility of taking care of your child cannot be the other parent or anyone you claim as a dependent. You must also have earned income that you are claiming to use this tax credit.
6. Earned Income Tax Credit
The Earned Income Tax Credit (EITC) was specifically implemented to help low income single parents and families. Basically this credit reduced the amount of taxes you will owe. The EITC is refundable meaning if the amount of your EITC is higher than the amount of taxes you owe, it will result in a refund.
To be eligible or this tax credit you must have:
- worked and paid taxes during the tax year.
- cannot have more than $3400 of investment income
- be claimed as a qualifying child on another individuals’ tax return
Furthermore, to claim this credit you must meet the low income requirements as follows:
- income must be below $39 131 if you claim one qualifying child
- income must be below $44 454 if you claim two qualifying children
- income must be below $47747 if you claim three qualifying children
7. Education Tax Credits and Benefits
You can use two different credits towards your education expenses which will reduce your taxable income in the American Opportunity Credit and the Lifetime Learning Tax Credit.
The American Opportunity Credit allows you to claim up to $2500 or adjusted qualified education expenses.
The Lifetime Learning Tax Credit allows you to receive a credit up to $2000 for your tuition and schooling expenses. You can claim this credit as many nears as need up to $2000 for every return. So if you are a parent attending school be sure to use this credit.
To be eligible for both these credits you must be officially enrolled in higher education courses and have attended the course for at least one semester.
Be sure read these credits carefully and use any of them that apply to you as it will greatly reduce your amount of taxable income. allowing you to receive a nice tax return in many cases.