Tax Breaks Every Single Mother Should Know

For millions of American families — especially those headed by single women, tax season is full of stress and number crunching.

There are, however, some useful tax breaks that can significantly lower the amount of taxes to pay.

And, in some cases, give cash refunds to families in jobs that pay too little to live on.

In fact, at tax time, being a parent comes with certain perks. For example, as for tax year 2014, eligible mother could claim

  • Up to $6,269 from the Earned Income Tax Credit.
  • Up to $1,000 per child from the Child Tax Credit.
  • Up to $3,000 from the Child and Dependent Care Credit

1Personal & Dependent Exemption

One of the most common tax deductions for single mothers is the dependent exemption — $4,000 for each child until your child turns 19, or 24 if he’s a full time student.

What’s especially nice is that you can take one exemption for yourself to cover your basic living expenses, that’s $4,000 off your taxable income.

So if you are a mother with two qualifying children, you can deduct $$4,000 for each exemption you claim on your tax return — that’s a total of $12,000 by which you may be able to reduce your taxable income.

2Filing Taxes as a “Head of the Household”

As a single mother and the sole breadwinner in the family, the first thing you must do is to select “Head of the Household” as your filing status.

Filing as “Head of Household” has two benefits. First, you’ll pay less taxes overall; and second, you’ll also be able to claim a significantly larger tax exemption.

Single $6,200 $6,300
Head of Household $9,100 $9,250
Married Filing Jointly $12,400 $12,600
Married Filing Separately $6,200 $6,300

For example, in 2015, taxpayers who use the head of household filing status may receive an $9,250 annual standard deduction. While, a single filer is only entitled to a $6,300 standard deduction.

3Earned Income Tax Credit

EITC, the Earned Income Tax Credit is a tax benefit designed primarily to help low- to moderate-income individuals and families whose earned income falls below a certain limit.

It isn’t a welfare handout per se. Only people who work and pay taxes can claim it; creating an incentive for them, including many who are poor, to leave welfare for work.1

The EITC is “refundable,” which means that when EITC exceeds the amount of taxes owed, it results in a tax refund, whose amount varies by income, family size and filing status.2

For example, if your tax liability is only $1072 and the credit you are allowed is $5,572, you may receive a refund check for $4,500.

2016 EITC Income Limits + Maximum Credit Amounts

None $506 $14,880 $20,430
One (1) child $3,373 $39,296 $44,846
Two (2) children $5,572 $44,648 $50,198
Three (3) or more children $6,269 $47,955 $53,505

Single parents with three or more children under age 19 who made less than $47,955 are eligible for a refundable credit of up to $6,269. Couples with no qualifying children earning less than $20,430 qualify for a credit of up to $506. Married couples, however, must file taxes jointly.3

Forms 1040EZ, 1040A, or 1040 can be used to claim EIC without qualifying children. To claim the credit with qualifying children, 1040A or 1040 must be used as well as attaching Schedule EIC.

4Child Tax Credit

If your child or children under the age of 17 (on the last day of the year), claimed as dependents and are US citizens, then you can qualify for Child Tax Credit.

This can reduce your taxes by up to $1,000 for each qualifying child. The child tax credit will be gradually reduced based on your income for the year until it reaches a threshold of $75,000 (by $50 for each $1,000 of income above that threshold amount).

Technically speaking, as your income increases, the exemption decreases proportionately. For some, utilizing the child tax credit can reduce their tax liability to zero.

5Additional Child Tax Credit

The Additional Child Tax Credit is a refundable tax credit for people who have a qualifying child and did not receive the full amount of the Child Tax Credit.

Unlike the EITC, the Additional CTC is partially refundable. Families whose credit exceeds their tax liability can receive the remainder of the credit in the form of a refund not exceeding 15% of their earnings above $3,000.

For example, a single mother with two working full-time, year-round at the minimum wage of $7.25 an hour — and earning $14,500 per year — could receive 15% of $11,000, or $1,725, as a refund.

An additional refundable credit may be claimed on Form 8812, Additional Child Tax Credit 4 if your earned income was greater than $3,000.

6Child and Dependent Care Credit

Paid a local daycare center to take care of your kid? Did you pay someone to care for your child so that you could work or look for work?

If you did, you may claim up to $3,000 of expenses paid in a year for one qualifying child under 13 or $6,000 max per family. Eligible expenses include the cost of a nanny, preschool, before- or after-school care and summer day camp.

This works best when you file as a “Head of Household”, and can cut your taxes by up to 35% of what you’ve paid for the service — the exact percentage is determined by your income level.

Keep in mind that the dependent care credit is not refundable, meaning it can only take your tax bill to zero. Any excess credit is not usable

To claim child and dependent care credit, complete and attach Form 2441 to your return. You must file taxes using either Form 1040 or Form 1040A to claim the credit.

7Education Tax Benefits

There are two (2) tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American Opportunity Credit and the Lifetime Learning Credit.

The former is a tax credit of up to $2,500 of the cost of tuition, fees and course materials, which can be claimed for expenses for the first four (4) years of post-secondary education.5 There is, however, no limit on the number of years for which you can claim a Lifetime Learning Credit based on the same expenses.

Unlike the American Opportunity Credit6, the Lifetime Learning Credit is non-refundable so the maximum credit is limited to the amount of tax you owe.

American Opportunity Tax Credit $2,500 tax credit per student
100% of first $2,000, 25% of second $2,000
Limit: First 4 years of postsecondary education
$80,000 to $90,000 (single)
$160,000 to $180,000 (joint)
Lifetime Learning Tax Credit $2,000 tax credit per student
20% of first $10,000
Unlimited number of years
$54,000 to $64,000 (single)
$108,000 to $128,000 (joint)

If you are eligible for both the American opportunity credit and the lifetime learning credit, you can choose to claim either credit, but not both.

No matter what your tax status is, take a little time to make sure that you’re taking advantage of all the benefits available to you — especially if this is the first time you’ll be doing your taxes as a single mother.

If you can afford it, it might even be worth spending a little money to seek advice from a professional tax consultant to make sure you are not missing out on a refundable tax credit worth up to nearly $6,000.

Low-Income Taxpayer Clinic

Funded by the IRS, Low Income Taxpayer Clinics (LITCs) represent low income individuals in disputes with the IRS — for free or for a small fee, including audits, appeals, collection matters, and federal tax litigation.

No application is needed to utilize this service. Each LITC will determine if you meet the income guidelines and other criteria before it will agree to represent you.

If you believe you’re eligible — and in need of help with tax matters, find the clinic nearest you7 and call the numbers listed on the list for an appointment.

  1. Center on Budget and Policy Priorities, Policy Basics: The Earned Income Tax Credit []
  2. Use the EITC Assistant to find out if you qualify. []
  3. IRS, Publication 596, Earned Income Credit (EIC) []
  4. IRS, Schedule 8812 (Form 1040A or 1040), Child Tax Credit []
  5. IRS, Chapter 2, Publication 970, Earned []
  6. Up to $1,000 of the credit can be refunded if your credit is more than you owe in taxes. []
  7. Low Income Taxpayer Clinic List []