An Overview of Single Parents Tax Credit

The federal government put tax credits and deductions to help ease tax liabilities and help taxpayers save on their returns. They, however, work differently. Check out their differences here. The tax credit will reduce your income tax bills. In this article we discuss the Single Person Child Care Credit (SPCC). A single parent tax credit reduces the overall taxes a taxpayer owes the government if they are the single caregiver for a child.

The IRS provides some relief for those who are raising one or more children on their own. Most single parents hold “head of household” status which allows them certain benefits such as a larger standard deduction and a more favorable tax bracket. By filing as a head of household, the single parent can have more income before moving to the next tax bracket. The standard deduction for a head of household is $19,400 for the 2022 tax year. Note that the rules for head of household filing status can be complicated but the benefits can be significant.

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Who Is Eligible for Single Person Child Care Credit? 

To claim the Single Person Child Care Credit or SPCCC, the single parent and the child must meet certain criteria. Here’s a list of conditions that the child and the single parent or guardian must meet to qualify for the credit:

Primary Claimant 

This is the person with whom a qualifying child (or children) lives for more than six months. They can be either the actual parents or the guardians who take care of the child at their own expense for the greater part of the year. 

Secondary Claimant 

The primary claimant can forego their SPCCC entitlement to favor a secondary claimant, who is someone that meets all other conditions – except for the condition that he or she does not live with the child for the greater part of the year. This secondary claimant does not need legal custody of the qualifying child but will have to prove that the child lives with them for one hundred days in a year.

Qualifying Child 

The child should be under the age of 18 at the start of the tax year or if the dependent is over 18, he or she must be enrolled in school full time. The qualifying child can be yours, adopted, or a stepchild you’re supporting at your own expense. It means that you’re taking care of the daily upbringing of that individual and are responsible for their care.

One cannot claim the SPCCC if they are:

  • Jointly considered as a married individual 
  • Married or in a civil partnership 
  • Cohabiting 

Saver’s Credit 

The federal government encourages taxpayers to save for their retirement – even more so for single parents. The Single Person Child Care Credit is geared toward moderate and low-income workers.

Tax Credit for Adoption 

If you’re a single person who has just completed an adoption process, you’re eligible for a tax credit for adoption. It was designed to cover all expenses that go along with adopting a child under the age of 18 or any individual who is physically or mentally disabled and unable to take care of themselves on their own.

Earned Income Tax Credit

Single parents can also get a tax credit on earned income to reduce the overall tax they owe the government. This helps taxpayers hold on to more of their income. To qualify, a taxpayer must file as head of household and have earned income of under $59,187. The amount of the tax credit may vary from person to person.

If you pay someone to care for your child or a dependent with a disability while you work, look for work, or attend full-time schools, you’re eligible for a child and independent care tax credit. This amount will vary depending on the number of dependents you have along with the expenses needed to care for them.

Head of Household Tax Credit 

Filing as head of household is not technically a credit, but it will result in a waiver on your overall tax bill if you’re a single parent who lives with the child for half the year and provide 50 percent of household needs.

Premium Tax Credit 

Also known as Health Coverage Tax Credit, this is a refundable credit for certain taxpayers who acquire their insurance coverage through the health insurance marketplace. The tax credits for single parents are meant to cover the monthly insurance payments. Generally, the tax credit amount a taxpayer can receive will depend on the income put against the federal poverty rate. It was designed to cover the difference between the cost of the health insurance plan and the amount you’re required to pay.

Seek Tax Planning Services from a CPA Firm

Tax planning is the best way single parents can minimize tax exposure. Seeking services from professionals from Marcus Fairall Bristol + CO PLLC who can help you manage complicated tax issues is imperative.

Certified public accountants will inform you of any tax credits, exemptions, and deductions you can claim. Furthermore, their knowledge and experience can help you plan for your future in terms of retirement by indicating what options you have.

Feel free to reach out at (915) 775-1040, should you have any queries surrounding taxation, forensic accounting, or anything else small business-related. We offer our clients a variety of accounting services such as the following:

Marcus, Fairall, Bristol + Co., PLLC
230 Thunderbird Dr Ste G, El Paso, TX 79912
Phone: (915) 775-1040