Filing taxes can be stressful, especially when you’re doing it on your own as a single parent. But don’t worry—there are plenty of tax breaks and credits designed to help you out. By knowing what to look for and how to claim these benefits, you can save a lot of money and potentially get a bigger refund.
1. File as Head of Household
One of the first things you should do as a single parent is make sure you’re filing as “Head of Household.” This filing status is specifically for people who are unmarried and pay more than half of the household expenses for themselves and a dependent. By filing as Head of Household, you can benefit in two major ways:
- Larger Standard Deduction: For the 2023 tax year, the standard deduction for Head of Household filers is $20,800. This is much higher than the $13,850 standard deduction for single filers, meaning you’ll lower your taxable income by a significant amount.
- Better Tax Brackets: Filing as Head of Household also means you’ll be in a more favorable tax bracket. This could reduce the percentage of your income that’s taxed, which could lead to more savings.
To qualify, your child must live with you for more than half the year, and you must pay for more than half of the household expenses. Make sure to double-check that you meet these requirements before filing.
2. Claim the Child Tax Credit
The Child Tax Credit is one of the most valuable credits available to single parents. For the 2023 tax year, you can claim up to $2,000 per child under the age of 17. This credit directly reduces the amount of tax you owe, and if it brings your tax bill down to zero, you can get up to $1,600 of the remaining credit back as a refund.
Here’s how it works:
- Full Credit: If your income is under $200,000 (or $400,000 for married couples filing jointly), you’re eligible for the full $2,000 credit per child.
- Partial Credit: If your income is above these thresholds, the credit amount will start to phase out, meaning you’ll get less than the full $2,000.
- Refundable Portion: Even if you don’t owe any taxes, you could still get up to $1,600 per child back as a refund.
Make sure to have your child’s Social Security number ready when you file, as you’ll need it to claim this credit.
3. Take Advantage of the Child and Dependent Care Credit
If you’re paying for childcare so you can work or look for work, the Child and Dependent Care Credit can help cover some of those costs. This credit is based on a percentage of the money you spend on childcare and can be worth up to $3,000 for one child or $6,000 for two or more children.
Here’s what you need to know:
- Eligible Expenses: Expenses that qualify include daycare, after-school programs, and even babysitters. However, the care must be provided for a child under the age of 13.
- Credit Percentage: The credit covers between 20% and 35% of your childcare expenses, depending on your income. The lower your income, the higher the percentage of your expenses you can claim.
- Work-Related Requirement: To claim this credit, you (and your spouse, if you’re filing jointly) must be working or actively looking for work.
This credit can significantly reduce the financial burden of childcare, so be sure to keep track of all your related expenses throughout the year.
4. Don’t Forget the Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is another major tax benefit designed to help low- to moderate-income workers, particularly those with children. The amount of the credit depends on your income, filing status, and the number of children you have.
Here’s a quick breakdown:
- Credit Amount: For the 2023 tax year, the EITC can be worth up to $7,430 if you have three or more qualifying children. Even if you only have one child, the credit can still be worth up to $3,995.
- Income Limits: To qualify, your income must be below certain thresholds. For example, if you have one child and file as Head of Household, your income must be less than $50,528 to qualify for the EITC.
- Refundable Credit: The EITC is refundable, meaning that if it reduces your tax bill to zero, you’ll get the rest of the credit back as a refund.
Because the EITC can be so valuable, it’s worth checking if you qualify, even if you don’t usually file taxes. There are also free online tools that can help you determine your eligibility and estimate the credit you could receive.
5. Communicate Clearly with Co-Parents
If you’re a single parent who shares custody of your children, it’s crucial to communicate with your ex-spouse or co-parent about who will claim the children on their taxes. Only one parent can claim the Child Tax Credit, Earned Income Tax Credit, and other child-related tax benefits, so deciding in advance who will do so can prevent complications.
Here’s what you should consider:
- Custody Agreement: The parent with whom the child lives for more than half the year typically has the right to claim these tax benefits. If custody is shared equally, the parent with the higher income usually gets to claim them.
- IRS Rules: The IRS has strict rules about who can claim a child as a dependent, so make sure your arrangement complies with these rules to avoid any issues.
- Written Agreement: It can be helpful to have a written agreement that outlines who will claim the child for tax purposes each year. This can prevent disputes and ensure that both parents are on the same page.
Miscommunication or both parents trying to claim the same child can lead to an audit or the need to amend your tax return, so it’s better to sort this out ahead of time.
6. Consider Tax-Advantaged Savings Accounts
As a single parent, saving for your child’s future is likely a priority. Luckily, there are several tax-advantaged savings accounts that can help you do this while also reducing your tax burden:
- 529 College Savings Plans: Contributions to a 529 plan aren’t deductible on your federal tax return, but the money grows tax-free, and withdrawals are tax-free as long as they’re used for qualified education expenses.
- Roth IRAs for Kids: If your child has earned income, you can open a Roth IRA in their name. Contributions are made with after-tax dollars, but the money grows tax-free, and withdrawals are tax-free in retirement.
- Health Savings Accounts (HSAs): If you have a high-deductible health plan, you can contribute to an HSA. Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
These accounts can provide long-term benefits for your child while offering you immediate tax savings, so consider incorporating them into your financial planning.
7. Plan Ahead and Get Professional Help
Taxes can be complicated, and tax laws change frequently. That’s why it’s a good idea to start planning early and consider getting help from a tax professional. Here are some final tips to keep in mind:
- Start Early: Don’t wait until the last minute to start thinking about your taxes. By planning ahead, you’ll have more time to gather the necessary documents, figure out which credits and deductions you qualify for, and ensure that you’re maximizing your refund.
- Keep Good Records: Save all receipts, bills, and other documentation that relates to your tax return. This will make it easier to claim deductions and credits, and will protect you in case of an audit.
- Use Tax Software or a Professional: If your tax situation is straightforward, tax preparation software can be a cost-effective way to file your return. However, if your situation is more complex or you’re unsure about how to claim certain credits, consider working with a tax professional who can provide personalized advice.
Remember, the goal isn’t just to get through tax season unscathed—it’s to optimize your financial situation for the year ahead. By taking advantage of the tax tips outlined above, you can reduce your tax burden and put more money back in your pocket.
Conclusion
Filing taxes as a single parent doesn’t have to be overwhelming. With the right knowledge and a little preparation, you can navigate the tax code with confidence and secure the tax breaks you’re entitled to. Whether it’s filing as Head of Household, claiming the Child Tax Credit, or taking advantage of the Earned Income Tax Credit, each step you take can help lighten your financial load and set you up for a better financial future. So, start early, stay organized, and don’t hesitate to seek professional help if needed. Your financial well-being and that of your child are worth it.