The economy is back on track, salaries are up and unemployment is down. Single mothers, on the other hand, still must struggle with the balance of everyday life. From working a full time job and making sure their children complete their homework to maintaining the household finances and more, single mothers work harder than most can imagine. Luckily during tax season, tax breaks for single mothers provide some much-needed financial relief.
Navigating the tax code and determining what tax breaks for single parents can be applied to a tax return can prove to be nothing short of a headache. Come tax season, the following tips will help you decide which tax breaks will maximize your tax refund:
Determine Who Qualifies as a Dependent
The Internal Revenue Service uses what’s known as the “custodial residency test” to determine the eligibility of a dependent.
To claim this on your taxes, the proposed dependent must have been living with you for the entire tax year and the majority of their financial support must have come directly from you. If there is a father involved that is not living with you and your children, the IRS might grant him the right to claim them as dependents. As a single mother, to ensure that you will receive the single parent tax credits, the following must apply:
- The father should not have provided financial support for the child.
- The father must not have legal written custody of the child.
- You must provide a written notice that claims the child as your dependent.
Use the Child Tax Credit
The child tax credit allows single mothers who file as heads of households have the ability to claim $1,000 as a deduction on their tax return. This will apply to only those who make less than $75,000 per year and the child must be a United States citizen, resident alien and 16 years old or younger. The child must also qualify as a dependent and should have lived with the mother for at least six months within the preceding year.
While claiming the child tax credit is popular for couples who decide what to claim on taxes when married, single mothers can find it even more useful, especially if they end up owing money to the IRS.
File as Head of Household
Head of Household status is perfect for single mothers. This status is always listed on tax return forms however, a large portion of taxpayers fail to use it to their advantage.
Filing as head of household effectively lowers your overall tax rate. To qualify, single moms must not have been married on the last day of the previous year, children should qualify as dependents and they should also receive more than 50 percent of their total support from the mother.
When added with other tax breaks for single mothers, the head of household status can really improve one’s financial standing after tax season is over.
Calculate and Deduct All Childcare Expenses
Dropping off and picking up the kids from daycare can often be just a small stop during a single mother’s hectic day. Forgetting to track childcare expenses and keep receipts can cost you financially when it comes time to file your taxes.
Make sure you track every single childcare expense paid during the previous tax year. To qualify for this, the child must be 12 years old or younger and the provider must be 19 years of age or older. Single moms can receive up to 35 percent of their total childcare expenses as tax credits when they file taxes, depending on their level of income.
The Dependent Exemption
Before tax season, as part of the 2014 income tax exemptions, single mothers can claim the dependent exemption.
Taking advantage of this single mother tax benefit is easily done by changing the amount of exemptions you claim on your W4. Under the “Personal Allowances” section of this form, single mothers need to carefully read the requirements for adding exemptions and make sure they qualify. Improperly adding too many exemptions can be a costly mistake once tax season rolls around.
Theoretically, each dependent can be claimed as an exemption. When filling out the W4, take note of how many dependents you have and enter that number as the amount of exemptions you want on the appropriate line. It’s important to keep in mind however, that the IRS does not account for any exemptions taken over the maximum allowed on your taxes.
Combining Deductions and Tax Breaks for Single Parents for Maximum Financial Benefit
The federal and state tax codes consist of a staggering amount of laws, loopholes and legal verbiage that comes across as a foreign language to almost everyone. To make matters worse, the federal and state governments almost always make changes to tax codes on an annual basis.
For single mothers, the best way to maximize financial return during tax season is to track family changes, expenses and complete all necessary tax paperwork as early as possible. If your family dynamic changes, contact your employer to make the change immediately on your W4 and take note of when that change was made. Compile all childcare receipts and enter the amount into an excel spreadsheet to make the process easier when April rolls around and double check your calculations before you file your return.
Maximizing tax breaks for single mothers doesn’t have to be a train wreck. Simple record keeping and remembering to claim the right exemptions and deductions will help keep your bank account full after April has come and gone.