As a single parent, you have a lot on your plate. You’re working hard to provide for your family, and you likely don’t have time to research clever tax loopholes for your yearly tax filing. If you’re more focused on paying off debt with low income than you are on maximizing your tax deductions, we’re here to help. Here are six tips specific for getting the most money back from your taxes when you’re a single parent.
1. Claim the Child Tax Credit
The Child Tax Credit is a tax credit available to parents who have children under 17. The credit can reduce your tax liability, and the 2021 tax year has an exclusive credit that sends you money even if you have no tax liability. You must file Form 1040, Schedule A, and attach Form 8332 to your return to claim the credit.
2. Claim the Earned Income Credit
The Earned Income Credit (EIC) is a tax credit available to low-income working families. The EIC can reduce your tax liability by up to $6,318 per year. To claim the EIC, you must meet certain eligibility requirements, including being a single parent or a married couple filing jointly.
3. Use the Head of Household filing status
If you’re a single parent, you may want to consider filing as head of household. This filing status allows you to take advantage of certain tax benefits, such as the child and dependent care credit, the earned income credit and excluded dependent children from your gross income. You can find more information about the head of household filing status on IRS.gov.
4. Claim the personal exemption
You may also want to consider claiming the personal exemption. This exemption allows you to reduce your taxable income by $4,050 per person for each dependent child you claim. You can claim the personal exemption on your tax return, or you can claim it on behalf of your child.
5. Deduct your childcare expenses
One of the most important things a single parent can do to save money on taxes is to deduct their child care expenses. This can include costs for daycare, preschool, and after-school programs.
However, the amount you can deduct depends on your income and the type of care you are using. If you’re using a daycare center, you may be able to claim the full amount of your expenses. However, if you’re using a home daycare, you may only deduct a percentage of the costs. Consult a tax professional to see what deductions qualify.
Start contributing to a 529 savings plan
A 529 savings account is an excellent way for parents to save for their children’s college education. 529 plans allow you to save money for your child’s college education without having to pay taxes on the money when it is withdrawn. While these contributions aren’t tax-deductible from your federal return, over 30 states across the US offer a full or partial tax deduction or credit for contributions made to 529 plans.
The bottom line
As a single mom or dad, it’s important to take advantage of all the tax breaks available to you to keep your family afloat. These six tips will help you do just that!