Tax Breaks for Single and Lower Income Parents, 2009 Tax Year

While there is really only one tax break that applies specifically to single parents, the HOH status, there are numerous tax breaks that are available for all parents. Be sure to read all IRS instructions carefully to be sure that you are qualified for the particular tax advantage but also be sure to take any tax beaks that you can.

Head of Household status:

To qualify for Head of household status you must:

1) Be unmarried or considered unmarried under IRS rules at the end of the tax year that you are filing. If your spouse did not live with you for the last six months of the year, and is not temporarily absent, you can be considered unmarried.

2) You must have provided more than one half of the cost of maintaining your home or residence for the year.

3) A qualifying person must have lived with you for more than one half of the year. Temporary absences for school are not counted. If your parent is your qualifying dependent, they do not have to live with you, special rules apply.

Head of household status provides a Standard Deduction of $8,350 for the 2009 tax year as compared to the single deduction of $5,700.

Full information for HOH status can be found at: www.irs.gov/publications/p17/ch02.html#en_US_publink1000170792

The earned income credit is available for taxpayers in lower income groups. Single taxpayers with no dependents must have an income of less than $13,440. This maximum amount rises to $35,463 for single taxpayers with one dependent, $40,295 with two dependents and the new bracket of $43,279 for single taxpayers with three dependents. Income limits are about $5,000 more for each category for those married and filing jointly.

This credit can actually give you back more money than you paid in taxes as it is a refundable credit. Important notes to keep in mind are that you must have earned income, your investment income must be less than $3,100, you must not be married filing separately and your qualifying child must have lived with you for more than one half of the year.

Earned income credit rules can become tricky in certain situations and full rules can be found at: www.irs.gov/publications/p17/ch36.html#en_US_publink1000174680

Child and dependent care credit:

Child and dependent care credits are available for taxpayers that pay for the care of qualified dependents while they work or look for work. Qualifying children must be under the age of 13 and must have lived with you for more than one half of the year. Payments for child or dependent care must be paid to someone that is not claimed as your dependent. This means that you can not pay your 15 year old dependent to care for your 5 year old dependent. You must complete the worksheet on form 2442 to figure the amount of the credit you can take. You are limited to entering an amount of $3,000 for one qualifying child or dependent and $6,000 for two. The form for this credit may be found at: www.irs.gov/pub/irs-pdf/f2441.pdf and instructions are available at: www.irs.gov/publications/p503/ar02.html

Child Tax Credit:

A child tax credit is available in addition to the child and dependent care credit. You may claim up to an additional $1,000 per qualifying child. Income limits do apply to this credit and worksheets must be completed to figure the amount of credit you can receive. This credit is applied to the amount of taxes your owe and is considered a non-refundable credit.

There is also an Additional Child Tax credit available for those that are unable to claim the full amount of the regular child tax credit due to the amount of tax owed. If your child tax credit is more than the amount of taxes you owe you can complete form 8812 to see if you can take more of the unused credit as a refundable credit. This will allow you to get more money back in a refund. Full details may be found at: www.irs.gov/publications/p972/ar02.html#en_US_publink100012085

The American Opportunity Credit and the Lifetime Learning Credit are tax credits you should look in to if you are paying for higher education for one or more qualifying children. These credits can also be taken if you are continuing your own education. These credits have been adjusted for the 2009 tax year to allow more taxpayers to take advantage of higher education credits. Education must be for post-secondary schooling but more qualifying expenses have been added. Taxpayers can not take both credits at the same time for the same student and should calculate which credit will give them the best tax advantage.

More information about the American Opportunity Credit and Lifetime Learning Credit can be found at: www.irs.gov/newsroom/article/0,,id=213044,00.html

While most of these tax breaks can be used by married couples or single parents they can be especially beneficial to single parents with only one source of income. Learn all that you can about what is available and take every credit that you are qualified for.