Single parents face slightly different choices and options when filing their taxes than married parents do. If you are a single parent, here are three ways you might be able to reduce your taxable income and receive a bigger tax refund.
Determining who the children live with
In the case of a separation or divorce, one parent usually has custody of the child (or children) and claims them as dependents on his or her tax return. But this is not always the case. Sometimes parents may come to an agreement about who will claim the child, regardless of who has custody. For tax purposes, what often matters most is who the child lives with for the majority of the time.
- The IRS may ignore a separation agreement or divorce decree when deciding if a child qualifies as a dependent.
- When a child lives more than half a year (183 days or more) with one parent, that parent usually has the right to claim the child as a dependent on his or her tax return, regardless of the custody arrangement.
- Where the child spends the night is a major factor for determining how many days of the year are credited to a particular parent.[T1]
1. File as head of household
Filing as head of household often gives you a higher standard deduction than filing single does. This can reduce your taxable income and save you money. To meet the requirements for head of household as a single parent, you must:
- Be the person who is paying more than 50% of the family’s household expenses;
- Be unmarried on December 31 of the tax year, and;
- Be the parent your child lives with for more than half of the year (unless your child is living at school).
TurboTax can help you decide if you qualify as head of household as a single parent by asking you a few simple questions.
2. Claim the Child Tax Credit
If you file as head of household and your taxable income is less than $200,000 a year, you may be eligible to claim the Child Tax Credit. This credit is now worth up to $2,000 per qualifying child. Unlike a tax deduction, which may lower your taxable income and possibly decrease the amount of tax you owe, the Child Tax Credit can reduce your tax bill on a dollar-for-dollar basis.
Example: You have three qualifying children. The Child Tax Credit can decrease your tax bill by $6,000 ($2,000 x 3 = $6,000).
If your Child Tax Credit is larger than the amount of income tax you owe, you could get up to $1,400 per child back as a tax refund. In the example above, you could receive up to $4,200 as a tax refund ($1,400 x 3 = $4,200).
To be eligible for the Child Tax Credit, your child must meet seven tests:
1. Age: be under age 17 on the last day of the tax year
2. Relationship: be your child, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister—or a descendant of any one of these people
3. Support: The child did not provide over half of his or her support for the year.
4. Dependent: be claimed as a dependent on your tax return
5. Citizenship: be a United States citizen, a resident alien, or a US national with a qualifying Social Security Number
6. Residence: must have lived with you for more than half of the tax year
7. Joint return: The child does not file a joint return for the year unless only to claim a refund of withheld income tax or estimated taxes paid.
3. Get the Child and Dependent Care Credit
You may also qualify for the Child and Dependent Care Credit. This credit can reimburse you for a percentage of the money you spent on child care while you work (or look for work). The credit is calculated on a sliding scale, based on your earned income.
- If you earn $15,000 or less, you can receive the maximum percentage of 35% of your childcare expenses - up to $3,000 for one child and $6,000 for two or more children.
- For each additional $2,000 you earn, the percentage you can claim decreases by 1%, down to a minimum of 20% if your income is $43,000 or more.
- The maximum credit you can receive is $2,100 if you have two or more children, pay $6,000 in childcare, and earn $15,000 or less ($6,000 x .35 = $2,100).
- If you earn $43,000 or more and pay $6,000 in childcare, your credit is $1,200 ($6,000 x .20 = $1,200).
To qualify for the credit, each child must be age 12 years or younger. In the year that a child turns 13, you can only claim the credit for the months that your child or dependent was 12.
To read more tax tips for single parents, visit TurboTax.com. Remember, with TurboTax, we’ll ask you simple questions and do all of the calculations for you.