Tax Breaks for Single Parents
Don't Miss Out on Important Tax Savings
Being armed with the right knowledge can help take the stress and guesswork out of filing your taxes as a single parent. Consider researching and taking advantage of some of these possible tax breaks.
File as Head of Household
Filing as head of household on your tax return has two benefits for single parents. First, you will pay fewer taxes overall. Second, you'll also be able to claim a higher standard deduction. The standard deduction for a head of household under 65 filing for the 2019 tax year is $18,350. This will increase by $300 for tax year 2020 to $18,650. Generally, you qualify for head of household status if you were unmarried on the last day of the year, you provided more than 50% of the funds needed to maintain your household, and your children lived with you for more than half the year. If you have any questions about whether you qualify, you should speak with a reliable tax representative in your area.
Single parents who file as head of household will be able to claim an exemption for themselves and each qualifying child. This means that for each exemption, part of your income will not be taxed. Keep in mind, though, that only one parent can claim each child as a dependent for tax purposes. Those parents who share approximately equal custody will need to determine which parent will claim the dependent exemption for each child.
A credit is different from an exemption because, as a credit, it is subtracted from the total amount of taxes you owe, and this can add up to substantial savings. In order to qualify for the Child Tax Credit, the qualifying child must meet certain requirements set forth by the IRS, including being under the age of 17 on the last day of the year. Additionally, If the amount of your Child Tax Credit is more than the amount of tax you owe, you may be eligible to claim the Additional Child Tax Credit, allowing you to receive a tax refund for the unused portion of your Child Tax Credit.
If someone else cared for your child so that you could either work or look for work, you may be eligible for child and dependent care expenses. In order to qualify, though, your child must have been under the age of 13 for at least part of the year. In addition, the person who was responsible for taking care of your child can not be the child's other parent or anyone who can claim you as a dependent. Also, in order to be eligible for the child care credit, you must have actually earned an income during the year. So, that means that if you are a stay-at-home parent or are between jobs, you would not qualify to receive the child care credit when you file your taxes.
This credit was designed to help low-income and moderate-income working families. Even if you did not earn enough money to owe taxes, you may be eligible for a refund through the Earned Income Tax Credit (EITC). If you claim the EITC or Additional Child Tax Credit (ACTC) on your tax return, the IRS must hold your refund until at least February 15, even the portion not associated with EITC or ACTC, according to the IRS.