Filing taxes can be a nuisance for anyone, especially busy single parents. The good news is that there are tax breaks that benefit single parents. However, taking advantage of the savings requires following IRS rules — and those rules are complicated. Here’s what you need to know about some of the most common child tax topics for single and divorced parents, including tax tips and answers to the biggest tax questions for single-income families.
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1. Determine Whether You Can File as Head of Household
“Many parents do not know that the head of household filing status exists, and instead select ‘single’ as (their) filing status,” said Pamela Kornblatt, president of Tax Strategists, a company that provides personalized tax preparation and advice. “The head of household status has many tax benefits, including a higher standard deduction amount.”
Filing as head of household also reduces a single parent’s taxable income. To qualify as head of household, a filer must:
Pay more than 50% of the household expenses
Be unmarried on the last day of the tax year
Have their child live with them for more than six months of the year, not including the time the child spends at school
A single parent who has more than 50% custody gets to claim head of household. The other parent, who has less than 50% custody, cannot file as head of household.
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2. Know Who Claims the Child Tax Credit
Single filers who make less than $200,000 ($400,000 if married, filing jointly) might be eligible for the child tax credit. For the parent to qualify for the child tax credit, the child must have been under 17 years old at the end of the tax year. The child’s residence and citizenship are also taken into consideration, as he or she must be a U.S. citizen, a U.S. national or a U.S. resident alien. See more about what it takes to be a qualifying child in 2022.
Claiming the child tax credit can decrease your taxes by $2,000 per qualifying child, which could equal a premium tax break for single parents who have many qualifying children.
If the credit is more than your tax liability, you might be able to receive up to $1,500.
Usually, the parent with custody, also known as the custodial parent, is the one claiming children on taxes, but there are exceptions that will allow the noncustodial parent to claim the child. See IRS Form 8832: Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent for more information.
3. Determine Who Claims the Child and Dependent Care Credit
In general, only the custodial parent can claim the dependent care credit. Some exclusions do apply, though.
“If a parent works for an employer who provides dependent care benefits, the parent may not be able to claim some or all of the child and dependent care credit,” Kornblatt said. Payment for dependent care does not qualify for the credit if the person who provided the care is one of the following:
Any dependent listed on your tax return
A parent of the child being cared for
Your own child who is 18 or younger
Amount of the Dependent Care Credit
Dependent care expenses are allowed up to $3,000 for one child and $6,000 for two or more children, but only a percentage of those expenses can be claimed. The dependent care expenses must be for a child under 13 — or a spouse or dependent who is incapable of self care — who lives with you for more than half the year.
Dependent Care Spending Account
For further tax breaks on dependent care costs, consider enrolling in a Dependent Care FSA. A DCFSA is a benefit account used to pay for eligible dependent care services, including preschool, summer day camp, before- or after-school programs, and child or adult daycare to allow you to work, look for work or attend school full-time. Funds are withdrawn from your paycheck pre-tax, which can reduce your overall tax burden.
4. Understand How the IRS Treats Child Support and Alimony
Child support is not taxable income. And if a parent paid child support, those payments are not considered deductible.
If your divorce or separation agreement was executed after Dec. 31, 2018, alimony payments are not deductible for the spouse who makes the payments, and they will not be included in the income of the receiving spouse. If the divorce or separation agreement was executed on or before Dec. 31, 2018, the opposite applies.
5. Claim Tax Benefits for Education
To take advantage of as many tax credits and tax deductions as possible, single parents need to be aware of everything for which they’re eligible. Here’s what you need to know about claiming education credits.
The American Opportunity Tax Credit and the Lifetime Learning Credit help defray the cost of post-secondary education, Kornblatt said. Qualifying single parents who are paying for college or other post-secondary education for their children might be able to claim these credits. The American Opportunity Tax Credit offers a maximum annual credit of $2,500 per student; the Lifetime Learning Credit offers a refund of up to $2,000 per tax return.
In addition to other rules specific to each credit, three basic criteria must be met in order to qualify for these education credits:
The parent, the dependent or a third party must pay qualified education expenses for higher education.
An eligible student must be enrolled at an eligible educational institution.
The eligible student must be a dependent listed on the filer’s tax return.
A couple of options are available as tax breaks for parents saving for their children’s futures. “A single parent planning to pay for college in the future can start saving now using an education savings account or 529 plan — both provide tax-related advantages,” Kornblatt said.
Qualified tuition plans — also known as 529 plans — vary from state to state, but the main tax advantage is the same: The earnings are exempt from federal tax when used for qualified education expenses of the designated beneficiary. And generally, this exemption applies to state tax as well. Tuition, fees, books, room and board all fall under the category of qualified expenses. But contributions to a 529 plan are not tax-deductible at the federal level. However, they might be deductible at the state level.
The Coverdell education savings account can be used to pay qualified expenses for elementary, secondary and higher education. Contributions to a Coverdell savings account are not considered deductible, but the amounts deposited in the account grow tax-free.
6. Determine Your Eligibility for the Earned Income Tax Credit
Some parents qualify for the earned income tax credit. Parents with earned income below certain levels can earn credits ranging from $3,733 to $6,935 depending on their filing status and number of children.
7. Deduct Adoption Expenses
A parent who adopts a child can claim a nonrefundable adoption credit for the fees, legal costs and travel expenses associated with a legal adoption. In addition, adoptive parents don’t have to pay tax on income they get from adoption assistance provided by their employers.
8. Take Advantage of Free Tax Return Preparation If You Qualify
When taking on taxes as a single parent, the complex IRS rules can be confusing, but you deserve to maximize your savings and possibly get some money back. Seeking the advice of a tax professional can ensure that you file correctly and receive all of the tax credits that you qualify for.
If you make $60,000 or less, have a disability or speak limited English, you likely qualify for the IRS’s Volunteer Income Tax Assistance program, which connects you with a certified volunteer to provide you with free basic income tax return preparation assistance. To locate the nearest VITA site, use the VITA locator tool on the IRS website or call 800-906-9887. Before going, read Publication 3676-B to see what services are provided, and check the IRS’s What to Bring page to make sure you have all the required documents and information needed.
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