Parents face a lot of worries in life, and one of those is filing taxes. If not done correctly, it can even lead to more mistakes, which can make parents feel very more confused and stressed. Filing of taxes requires a lot of reviews and rigorous record-keeping to get it done correctly. It also requires a specialized knowledge regarding tax laws and financial matters. Gaining deeper understanding with these matters can help you form strategies, which can be used to reduce your taxable income, and even claim tax refund. If you’re a single parent, consider these tax tips to help you ease your financial burden and help you focus more on growing your savings and kids.
File as head of household.
Filing as head of household provides you with several tax benefits, including lower tax rate and higher deductions. But it’s important to realize that not all single parents can be qualified for this status. In order to qualify, you must be unmarried on the last day of the tax year, provide at least more than half the cost of keeping up your home, and your kids live with you for more than six months of the year.
Claim your exemption for a dependent.
Claiming an exemption for each of your dependent can greatly reduce your taxable income, which is truly a great relief for single parents like you. In 2014 tax year, the amount that you can deduct for each exemption is $3,950. The exemption amount is deducted from your adjusted gross income, which reduces your tax, and depending on your tax bracket can result to bigger tax refund. However, you must know that if your adjusted gross income exceeds a certain amount, you lose part of the benefit.
Take the child tax credit.
As a single parent filing as head of household, you can also claim Child Tax Credit, which can help you greatly reduce your tax burden. The maximum amount of credit that you can take is $1,000 per child. But just like other tax benefits, you must again meet certain requirements set forth by the IRS to qualify, including earning less than $75,000 a year and having a dependent that is under the age of 17.
Use child and dependent care tax credit.
If you pay someone else to care for your child or other dependents (e.g. aging parents) so that you can work, look for work, or continue your study, you can be qualified to claim the Child and Dependent Care Credit. This allows you to take up to $3,000 tax credit for each qualifying dependent and $6,000 for two or more qualifying dependents. In order to qualify, though, your child must be under the age of 12.
Take the Earned Income Tax Credit.
If you’re a single parent earning less than $46,997, claim the Earned Income Tax Credit. This allows you to receive a credit of up to $6,143 in 2014, which can substantially add up to your savings. You can check the IRS website to know exactly what this about and determine the requirements needed for filing.