Tax Breaks for Single Parents

The IRS offers a few breaks for single-parent heads of household

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Being armed with the right knowledge can take some of the stress and guesswork out of filing your taxes as a single parent, and it could save you some money at tax time. Several tax law provisions are designed to give a bit of a financial boost to those raising kids on their own, but you have to know what they are and how they work to take advantage of them. 

This article will give you more information to research the tax breaks that might work for you. 

File as Head of Household

Filing as head of household on your tax return provides two benefits for single parents: You’ll be able to claim a higher standard deduction, and you can earn more than single filers before you move into the next higher tax bracket. The standard deduction for head-of-household filing status is $18,650 for 2020, the tax return you’ll file in 2021. It increases to $18,800 for 2021 because standard deductions are indexed for inflation. 

You’ll qualify for head-of-household status if you were “considered unmarried” on the last day of the year (Dec. 31), if you paid for more than 50% of your household’s expenses, and if your children lived with you for more than half the year. You’re considered unmarried if you’re single, divorced, or didn’t live with your spouse at any point during the last six months of the tax year. 

The rules for this filing status are complicated and the benefits are significant, so speak with a tax professional to make sure you qualify, if you think you might. 

The Child Tax Credit

A tax credit is different—and more beneficial—than a tax deduction. It's an amount of money subtracted directly from the tax you owe the IRS, so this can save you cash out of pocket that can be put toward other things. It’s a tax break awarded simply for having a child or children. 

Your child must meet certain requirements set forth by the IRS to qualify for the Child Tax Credit. They must be under the age of 17 on the last day of the year. They must also have lived with you more than half the year, and they can’t have contributed or paid for more than 50% of their own support needs. The credit is worth up to $2,000 per child for tax year 2020. Income limits apply to parents as well, but they’re quite generous: $200,000 in adjusted gross income (AGI) for single parents as of tax year 2020. 

Claiming the Additional Child Tax Credit can result in a tax refund, if you don’t qualify for the full $2,000 per child.

The American Rescue Plan Act (ARPA), signed into law in March 2021, increases the size of the Child Tax Credit, but for one tax year only: 2021. It’s worth up to $3,000 per child in this tax year, or $3,600 if your child has not yet reached age 6. The law makes the entire amount refundable in 2021 as well, and it increases the age limit to 17 on the last day of the tax year.  

Child and Dependent Care Credit

You might be eligible for the child and dependent care tax credit as well if you paid someone to care for your child while you went to work or looked for work during the tax year.

Your child must be under the age of 13 to qualify, or disabled if they’re age 13 or older and physically or mentally incapable of caring for themselves. The person responsible for taking care of your child can’t be their other parent or anyone you can claim as a dependent, either. The credit is a percentage of up to $3,000 in expenses for one child, or $6,000 for two or more children. The percentage that is credited is up to 35%, depending on how much you earn. 

The ARPA also expands the child and dependent care credit for tax year 2021, giving parents up to 50% of $8,000, or $16,000, in care costs, respectively. 

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is designed to help low-income and low-middle-income working families. You might be eligible for a refund even if you didn’t earn enough to owe taxes if you can claim this one because it’s fully refundable. 

The EITC is worth up to $3,584 in 2020 if you have one qualifying child, increasing to as much as $6,660 if you have three or more qualifying children. Again, income limits apply, so your credit could be less, depending on how much you earn. It increases to up to $3,618 for one child, and up to $6,728 for three or more children in 2021 because it, too, is indexed for inflation.

People whose children don’t have Social Security numbers but who are otherwise eligible can claim the credit under the terms for childless households in tax year 2021 via the ARPA rules. This isn’t the case in other tax years.

By law, the IRS must hold your refund until March if you claim the Earned Income Tax Credit or the Additional Child Tax Credit. This gives the government time to make sure that everyone who claims the credit is legitimately entitled to it. 

The Bottom Line

The federal government has some relief to offer if you’re raising children on your own. You might be able to earn more before moving into a higher tax bracket, or be eligible for cash refunds for each of your children. 

But the rules for these tax breaks are particularly complicated. Tax preparation software may be able to guide you through the process, and it’s free at IRS Free File if you earned $72,000 or less in 2020. Otherwise, you might want to consider enlisting the help of a tax professional.

Frequently Asked Questions (FAQs)

What are the tax brackets for a single parent?

A single parent who files taxes as the head of household for the 2021 tax year will pay 10% income taxes on income up to $14,200. The rate then increases to 12% up to $54,200, then 22% up to $86,350, then 24% up to $164,900, then 32% up to $209,400, then 35% up to $523,600. The top tax bracket rate of 37% applies to all head of household income beyond $523,600.

What should a single mom claim on her W4?

A single parent can claim each child they care for as a dependent on their W4. For example, if a single mom has two children, she may want to claim two dependents on her W4. However, it's entirely up to the parent as to how they want to file their taxes. If a parent lives paycheck-to-paycheck, they may want to claim as many dependents as possible to maximize their take-home pay throughout the year. On the other hand, if the parent prefers to have a large tax refund every year, they may claim fewer dependents and decrease their take-home pay.