If you’re a single mother filing your taxes, take advantage of tax credits and deductions to lower your taxable income and lower your tax bill. There are a variety of tactics, credits, and deductions that can be used to minimize taxable income and, in certain situations, even provide tax refunds even if you didn’t pay any taxes. Read on to learn more tax tips for single parents.
1. File as Head of the Household
As a single mom, if you file as a head of household, your tax return is usually lower than if you file as a single or married filing separately. It also entitles you to a larger standard deduction. You must be single on the last day of the tax year to be eligible for head of household status. You must also provide more than half of your income to the support of your house, and your children must reside with you for at least six months of the year.
2. Determine Who Qualifies as a Dependent
If you claim your child as a dependent, you must meet certain criteria. In most circumstances, the IRS utilizes the custodial residency test to evaluate whether you can claim your child as a dependent. If there is a non-custodial father, the IRS may allow him to claim your child as a dependent if all of the following conditions are met:
· You and your child’s father have been living apart for the past six months, whether married or not, or are legally divorced or separated.
· For at least half of the year, the youngster received at least half of his support from his parents.
· Legal custody of the child is shared between you and the child’s father.
· Either you sign a written waiver agreeing not to claim the child as your dependent, or you have a pre-1984 legal agreement allowing the non-custodial father to claim the child as a dependent.
3. Claim the Child Tax Credit
The American Rescue Plan Act, which was passed in March of 2021, enabled the expansion and advancement of the Child Tax Credit. The majority of families do not have to do anything in order to receive their advance payment. The IRS will usually determine the payment amount using your 2020 tax return. Families that are eligible will get early payments via direct transfer or check.
These payments are a portion of your Child Tax Credit for 2021. When you file your 2021 tax return in 2022, the amount you receive will be compared to the amount you are entitled to. The advance payments will cover nearly half of the tax credit for most families. You will owe an additional sum on your tax return if you receive too little. In the odd case that you receive too much, depending on your income level, you may be required to repay the excess.
A single woman filing as head of household and earning less than $75,000 as of publication can claim a $1,000 child tax credit for each kid for tax years 2018 through 2020. Beginning in 2018, this amount rises to $2,000 per kid, while the income threshold for single or head-of-household taxpayers rises to $200,000 before they forfeit the credit. The credit is deducted from your tax bill. If you owe less than the child tax credit, you’ll get a refund in part or in full.
Conditions a child should meet to qualify for the CTC
· The child is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half brother, half-sister, or a descendant of any of them;
· The child is under age 17 at the end of the tax year;
· The child did not provide over half of his or her own support for the tax year;
· The child lived with you for more than half of the tax year ;
· You claimed the child as a dependent on your return;
· The child does not file a joint return for the year;
· The child is a U.S. citizen, U.S. national, or U.S. resident alien.
Changes in the Child Tax Credit
In 2021, the American Rescue Plan increased the maximum Child Tax Credit to $3,600 for children under the age of six and $3,000 for children from six to seventeen. The credit was worth up to $2,000 per qualified child before 2021, and 17-year-olds were not eligible.
The new Child Tax Credit limitations for 2021 are lower than the original Child Tax Credit levels. Families that do not qualify for the benefit under new income restrictions can still get the $2,000 per child credit if they use the original Child Tax Credit income and phase-out limits.
In addition, for the year 2021, the entire credit is totally refundable. This means that it is available to all qualified families, even if they paid no federal income tax. Prior to 2021, the refundable component was limited to $1,400 per kid, and there were other restrictions for obtaining the refundable portion, such as earned income. For the year 2021, there is no requirement for earned income.
4. Childcare Expenses Can Be Deducted
You may be eligible for the Child and Dependent Care Credit if your dependent child is 12 years old or younger and you pay for daycare while you work or look for a job. You must have a source of income, be a full-time student, or be physically or mentally incapable of caring for yourself to qualify. The care provider must be at least 19 years old, cannot be the qualifying child’s parent, and must be listed on your tax return. The credit can be up to 35 percent of childcare costs, depending on your income. Any employer contributions to childcare fees must be deducted from the total cost.
Single mothers are often juggling a lot of things. Whether you’re in the US or abroad, managing your taxes can be an overwhelming process if it’s not done right. That’s where TFX comes in! We work with single moms and dads every day to help them get their tax returns filed quickly and accurately so they can spend more time enjoying life without worrying about paperwork.
