As if filing taxes isn’t aggravating enough, it can be even more stressful for single and divorced parents. There are tax breaks that benefit single parents, various options to consider and, of course, exceptions to certain rules. Here are the answers to the most common questions single parents ask themselves as they get ready to file taxes.
1. Are There Special Deductions for Single Parents?
Single filers and head of households who make less than $75,000 a year might be eligible for the child tax credit. Married couples filing jointly can also claim this credit, but the income cap is $110,000 a year. To qualify for the child tax credit, the child must be under 17 years old at the end of the year. Also, the child’s residence and citizenship is taken into consideration. Single parents can also file as head of household, which could greatly reduce how much taxes they pay overall. This offers a higher standard of deduction, and they can claim a dependent exemption for themselves and each qualifying child.
2. Who Qualifies as Head of Household?
As mentioned, filing as head of household offers a higher deduction and reduces a single parent’s taxable income. However, not every single parent is qualified – they must meet certain requirements.
To qualify as head of household, they must pay more than 50 percent of the household expenses, be unmarried on the last day of the tax year, and their child must live with them for more than six months of the year (not including the time they spend at school). So, if a single parent has more than 50 percent custody, they get to claim head of household. Meanwhile, the other parent with less custody cannot.
3. Who Can Claim the Child Tax Credit on Their Return?
Usually the parent with custody claims the child on their tax return. Of course, there are exceptions. For example, if a child spends the majority of time at one parent’s house, even if it’s not in the custody agreement, the IRS might grant that parent the right to claim the child on their tax returns.
The child tax credit is different than a dependent exemption. It’s subtracted from the total amount of taxes the taxpayer owes, and the dependent exemption is deducted from the taxpayer’s adjusted gross income.
4. How Much Is the Child Tax Credit?
The child tax credit can decrease parents’ taxes by as much as $1,000 per qualifying child. If there is a balance left over after subtracting the credit, a parent might be able to receive it back as a tax refund. This is known as the Additional Child Tax Credit. For example, if a parent owes $500 in tax but claims a $1,000 child tax credit, they might receive up to a $500 tax refund.
5. Who Gets to Claim the Dependent Care Credit?
Even if the other parent claims the dependent exemption, only the custodial parent can claim the dependent care credit.
6. How Much Is 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 care must also be used so a parent can work or look for work. Childcare expenses can only be claimed for children 12 years old and younger.
7. How Do I Qualify for a Dependent Exemption?
The IRS allows parents a tax exemption for each qualifying child, which is meant to reduce the financial burden of caring for a child. The exemption is deducted from your adjusted gross income, reducing your taxable income and sometimes resulting in a greater refund.
Only one parent can claim this deduction, and their adjusted gross income must not exceed a certain amount. If there is only one child, or an odd number of children, some parents might alternate each year to determine who can claim the child or children. If there is an even number of children, the parents might decide to split them 50/50. No matter how the parents decide to work it out, the details are typically laid out in the divorce settlement. If the custodial parent doesn’t want to take the exemption on their tax return and agrees that the non-custodial parent can take it, the IRS will require the custodial parent to fill out Form 8322.
8. Do I Need to Claim My Child Support?
No. Child support is not considered taxable income. And if a parent paid child support, those payments are not deductible.
9. Does Alimony Count as Income?
Yes, alimony counts as income. The spouse accepting alimony must report all the payments as income when they file taxes. They can increase their employer tax withholding to avoid a surprise tax bill at the end of the year. The ex-spouse paying the alimony may claim a deduction.