As of 2014, there are over 12 million single-parent families in the United States. If you are among those single parents, no one needs to tell you that single parenthood has its own set of financial stressors. The IRS has a series of child-related tax breaks that could ease some of the financial burden for you. Read on to find out how these tax breaks can help you and your family.
Child Tax Credit
The Child Tax credit allows parents to claim up a $1,000 tax credit for each qualifying child 17 and younger. This tax credit can reduce your overall tax liability, so it can have more positive impact on your bottom line than a deduction can.
You are eligible to claim the Child Tax Credit if your child or children meet the following criteria:
- Under 17 years old at the end of the tax year
- They didn’t provide over half of their own support during the tax year
- Lived with you for more than half the tax year
- You can claim them as a dependent on your tax return
- Your child is a US resident, US national or US resident alien.
Furthermore, if you are a low-to-moderate income earner, you may be able to receive any excess credit as a refund with the Child Tax Credit.
Child Care Expense Deduction/Dependent Care Credit
If you have children under 12 (and eligible to be claimed as a dependent) and are currently employed or seeking employment, you could reduce your overall tax liability by claiming child care expenses. However, if your child has a disability or is unable to care for themselves, the under-12 limitation doesn’t apply.
Day care options such as child care programs, home-based child care, nannies/babysitters and/or summer camps qualify under this credit. You will need to get the EIN at the end of the year for any camps or programs (such as the Y or after-school programs) or the social security number for any individuals who provide child care on an ongoing basis.
This credit is limited to up to $3,000 per year for one child or to $6,000 per year for two or more children. If you are married but filing a separate return, you can’t claim the credit.
Head of Household
The Head of Household tax filing status will allow you to claim a higher standard deduction and can further reduce your tax liability. Your children must live with you for more than half the year and they must meet the Qualifying Child criteria (see above). You’ll need to be single as of the last day of the year and to provide more than half of the overall household support in order to file as Head of Household.
Through programs such as the Child Tax Credit, the Dependent Care Credit, child care expense deductions and the Head of Household filing status, the IRS hopes to lessen the tax burden for single parents.
For more detailed information on the Child Tax Credit, refer to IRS Publication 972 and for more information on the Dependent Care Credit, check out IRS Publication 503
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