Taxes can become overwhelming for many single parents. Consequently, some useful tax breaks can considerably reduce the amount of taxes you have to think about. For some of them, refunds are given to qualified applicants. We all know how important every penny can be especially if you’re handling the bills all alone. So, here are some popular tax breaks to be aware of:
Head of household
When you file your taxes as head of household, you will get a lower tax rate than if you file as single or married filing separately and it entitles you to a much larger standard deduction. You must be single on the last day of the tax year to qualify for head of household status, and you must also contribute more than half of your income to the support of your home, and your children must live with you for at least six months of the year.
The Child Tax Credit
The Child Tax Credit is a refundable tax credit for children.
To be eligible for the Child Tax Credit, your child must meet certain IRS requirements. On the last day of the year, they must be under the age of 17. They must also have spent more than half of the year with you, and they must not have contributed or paid for more than half of their own support needs. Parents are subject to income limits, but they’re quite generous: single parents can earn up to $200,000 in adjusted gross income (AGI) and get as much as $2000 per child.
Child and Dependent Care Tax Credit
You can claim the tax credit if you’re paying for child care while you’re at work. The Internal Revenue Service (IRS) offers a Child and Dependent Care Tax Credit to help you pay less tax. There’s a good chance you’ll qualify for a Child and Dependent Care Tax Credit if you pay someone to look after a child (under the age of 13) or a disabled dependent so you can work, look for work, or go to school full-time. The amount of credit you’ll get depends on the number of children you have and the amount of qualifying expenses you’ll have to pay to care for them. For one child, a maximum annual tax credit of $3,000 is available. The annual tax credit for families with two or more children is capped at $6,000 per year.
If you’re raising children on your own, the federal government may be able to help. You may be able to make more money before entering a higher tax bracket, or you may be eligible for cash refunds for each of your children.