If you're a single mom filing your taxes, make use of tax credits and deductions that can help reduce your taxable income and reduce the amount of tax you pay. A number of strategies, credits and deductions can be used to reduce taxable income, and in some cases, allow tax refunds even if you didn't pay in any taxes. When you use TurboTax, we'll ask simple questions and handle these calculations for you.
For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.
File as head of household
Filing as head of household usually gives you a lower tax rate than if you file as single or married filing separately. It also allows a higher standard deduction. To qualify for head of household status, you must be unmarried on the last day of the tax year. You also must contribute more than 50 percent toward the financial support of your home, and your children must live with you for more than six months of the year. TurboTax can help you determine if you qualify for head of household status.
Establish qualifying dependents
There are conditions that determine if you can claim your child as a dependent. The Internal Revenue Service uses the custodial residency test, in most cases, to determine if you can claim your child as a dependent. However, if there’s a non-custodial father, the IRS can grant him the right to claim your child as a dependent if all these conditions apply:
- You and your child’s father, whether married or not, lived apart for the last six months or are legally divorced or separated.
- The child received at least half of his support from the parents for at least half of the year.
- You and/or the child's father have legal custody of him.
- Either you provide a written waiver to not claim the child as your dependent or a pre-1984 legal agreement exists that allows the non-custodial father to claim the child as a dependent.
Claim the dependent exemption or dependent credit
For tax years prior to 2018, the IRS allows a tax exemption to reduce the burden of caring for a child. “This can be a big plus for single moms,” advises Bill Symons, president of Computer Accounting Systems in Oswego, N.Y. “Claiming an exemption for each child can greatly reduce a single mom’s taxable income and in some cases, depending on her tax bracket, give her a bigger tax refund.” However, once a single mother’s adjusted gross income exceeds a certain amount, the deduction is phased out.
Beginning in 2018, dependent exemptions are no longer available and have been replaced by a higher standard deduction and higher child tax credit (see below).
Include the child tax credit
Stimulus impact on the Child Tax Credit and on the Additional Child Tax Credit for 2021
Advance Child Tax Credit Payments
The expanded and newly-advanceable Child Tax Credit was authorized by the American Rescue Plan Act, enacted in March of 2021. Most families do not need to do anything to get their advance payment. Normally, the IRS will calculate the payment amount based on your 2020 tax return. Eligible families will receive advance payments, either by direct deposit or check.
These payments are an advance of your 2021 Child Tax Credit. The amount that you receive will be reconciled to the amount that you are eligible for when you prepare your 2021 tax return in 2022. Most families will receive about one-half of their tax credit through the advance payments. If you receive too little, you will be due an additional amount on your tax return. In the unlikely event that you receive too much, you might have to pay the excess back, depending on your income level.
Child Tax Credit Changes
The American Rescue Plan raised the maximum Child Tax Credit in 2021 to $3,600 for qualifying children under the age of 6 and to $3,000 per child for qualifying children ages 6 through 17. Before 2021, the credit was worth up to $2,000 per eligible child, and 17 year-olds were not eligible for the credit.
The Child Tax Credit changes for 2021 have lower income limits than the original Child Tax Credit. Families that do not qualify for the credit using these income limits are still eligible for the $2,000 per child credit using the original Child Tax Credit income and phase-out amounts.
In addition, the entire credit is fully refundable for 2021. This means that eligible families can get it, even if they owe no federal income tax.
Before 2021, the refundable portion was limited to $1,400 per child and there were other requirements regarding earned income to obtain the refundable portion. There is not an earned income requirement for 2021.
For updates and more information, please visit our 2021 Child Tax Credit blog post.
If you're doing your 2020 taxes, here's what you should know about the Additional Child Tax Credit
For tax years from 2018 through 2020, a single mom filing as head of household and making less than $75,000 as of publication, can claim a $1,000 child tax credit for each child. Beginning in 2018, this amount increases to $2,000 per child and the income threshold before beginning to lose the credit increases to $200,000 for single or head of household filers. The credit amount comes off your tax bill. If you owe less than the child tax credit, you’ll receive the some or all as a refund. To qualify, the child must:
- Be 16 years old or younger and be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, grandchild, niece, nephew or a legally adopted child
- Have lived with you for more than six months
- Be a United States citizen, U.S. national or U.S. resident alien
- Be your dependent
- Have received more than half of their support from you
If your dependent child does not qualify for the child tax credit, perhaps due to their age, you can still likely claim the lesser dependent credit instead.
Deduct childcare expenses
If your dependent child is 12 years old or younger, and you pay for daycare while you work or look for work, you may be eligible for the Child and Dependent Care Credit. To qualify you must have an income, be a full-time student, or be physically or mentally unable to care for yourself. The care provider must be older than 19 years of age, can’t be a parent of the qualifying child, and must be identified on your return. Depending on your income, the credit can be up to 35 percent of childcare costs. Any contributions to childcare expenses from an employer must be deducted from the total expense.
Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we've got you covered. Feel confident doing your own taxes.