While most single moms consider motherhood to be a privilege they wouldn’t trade for the world, this doesn’t mean their jobs are easy or inexpensive.
Single moms need and deserve every break they can get, including tax credits. Thankfully, the IRS does provide single parents will several tax breaks it does not allow other groups of individuals to take advantage of.
If you are a single mother, this information is vital. By taking advantage of certain tax credits, your return can end up in the thousands.
Think car repairs, furniture, new school clothes for your child, or even a mini-vacation. Many single parents look forward to tax time every year just for this reason.
Introduction to Tax Credits and Benefits
Before we begin talking about specific tax credits and benefits available to single mothers, we need to discuss the differences between a tax credit and a deduction. Many individuals confuse the two, but they are very different.
Deductions decrease the amount of taxable income an individual is able to claim. A tax credit reduces the amount of taxes a person owes and sometimes allows the individual to add more money to their refund.
Deductions like the dependent exemption can be very beneficial to single mothers, since they reduce the amount of taxable income an individual has for each child.
There are several different tax credits available to single mothers to help them add more money to their tax refund.
Some of the most common, and most helpful, are:
- Child Tax Credit
- Child Care Credit
- Earned Income Credit
Head of Household Exemption
As a single parent, you have the option of almost always choosing “head of household” when you are filing your taxes. This option is even available to you if you are still married, as long as you have been separated and living on your own with custody of your child for a certain period of time.
This exemption is extreme beneficial to single mothers. When filing as head of household, single parents are able to claim bigger deductions and are taxed at a smaller rate than married individuals filing jointly or separately or single individuals without children.
Before you can file as head of household, however, you must be sure that you meet the following criteria:
- You need to be unmarried or, if you are still married, must have been living separately from your spouse for at least the last six months.
- You must have a child who lives with you for at least six months out of the year. This child can be yours by birth or adoption, can be a grandchild, and must be unmarried.
- You must have been responsible for paying for at least half of the cost of caring for both your home and child for at least six months of the past year.
If you don’t know whether you qualify for a head of household status, visit the IRS at www.irs.gov and look at topic 353. This topic explains in detail who can and can not file as head of household.
The Dependent Exemption
The dependent exemption is a deduction that reduces the amount of taxable income single mothers have. The amount received for each dependent of the taxpayer’s household is fixed, and in 2012, the deduction is $3,800.
In order to claim a dependent exemption, your child must meet the following qualifications:
- Be related to you by birth, adoption, marriage, or foster placement.
- Be a U.S. citizen
- If the dependent is married and working, you can still claim the dependent exemption if he is filing a tax return simply to get a refund, not because he has to. The dependent and his spouse must not owe any taxes when filing separately rather than jointly.
- If the dependent works, he must have earned a gross income that is less than the amount of the exemption for the year.
- You must provide at least half of the support for the dependent through the year.
The Child Tax Credit
The child tax credit is a helpful tax benefit available to single mothers that reduces the amount of taxes you owe by up to one thousand dollars.
The full tax credit is available to anyone with a child, and the full $1,000 dollars can be deducted if:
- You are married and filing jointly with an combined income of less than $110,000.
- You are married and filing separately with an income of less than $55,000.
- You are single with an income of less than $75,000.
This is not a credit that can be refunded. This means, if you owe $700 to the IRS and receive a tax credit of the full $1,000, you will not receive $300 back. You will simply owe nothing. Claiming the credit is easy though on both 1040 and 1040a.
To qualify, your child, or children, must be:
- Less than 17 years old at the end of the year
- Claimed as your dependants on your tax return
- United States citizens
Publication 972, found at www.irs.gov, provides more information on the child tax credit and how to qualify.
Child Care Credit
Were you a full-time student this past tax year? Did you look for work or work? While you were busy trying to better your life and provide for your family, were you forced to pay for child care?
If so, you are probably eligible for the child care credit. This credit is not refundable, like the child tax credit, but it will greatly reduce the amount of taxes you owe the IRS.
To obtain this credit, you must file as single, head of household, or married filing jointly. If you are able to file this way, you will be able to obtain as much as 35% back from the amount you paid for childcare.
If you have a lower income, you will be able to obtain a larger percentage of your child care expenses. Eligibility for the credit is limited to $3,000 for one child and $6,000 for two children or more.
Expenses that qualify include:
- If you used day camp for childcare instead of regular daycare, you can use these expenses for the credit. The day camp must not be a sleep-away camp, however.
- Daycare, nursery school, or kindergarten expenses. School cost and childcare cost may be separated, but if this is the case, only the childcare cost will be eligible for the credit.
If you are filling out a 1040, you will need to use the 2441 form to use the child care credit. However, if you are filling out a 1040a, you will need to use the schedule 2.
The childcare provider’s name, address, and social security number or tax identification number must be used on the forms.
Earned Income Tax Credit
While not every single mother who files taxes will qualify for the earned income tax credit, many do. This tax credit provides tax breaks to single mothers who have a very low income and provides the biggest benefits to those who have at least two children.
Between 2009 and 2012, however, the credit has been temporarily increased for those who have three or more children. While there is quite a bit of paperwork involved with obtaining this tax credit, it is well worth the hassle.
For the year 2012, the maximum earned income credit is as follows:
- $5,891 for three or more children with an income of less than $45,060
- $5,236 for two children with an income of less than $41,952
- $3,169 for one child with an income of less than $36,920
- $475 for no children with an income of less than $13,980
To qualify for earned income credit and claim qualifying children, you must meet the following criteria:
- You must have a child related to you by marriage, adoption, foster arrangement, or birth.
- The dependent must be 18 year old or younger by the end of the year, 23 years old or younger and be a full time student, or be permanently disabled at any age.
- The child or dependent must live with you for at least six months of the year and you must have a permanent residence within the United States where the child lives.
For more information, feel free to visit www.irs.gov and read the publication titled 596. This publication will provide you with additional information about the income tax credit.
If you are struggling as a single mother and think you may qualify for some of the many tax credits and benefits available from the IRS, consult a tax professional.
He or she will be able to assist you in determining the credits and deductions you qualify for.