Raising children is rewarding but expensive. However, there are tax breaks for single moms. Contact tax and accounting service in Brooklyn to see if you qualify as a single mom for any of these savings on your taxes.

1. File Taxes Early Rather Than Wait Until the Last Minute

Single moms should file their taxes early instead of waiting until the last minute. Obviously, if you’re expecting a refund, it’s money in your pocket sooner rather than later. 

Rushed returns completed at the last minute result in more errors or overlooked credits and deductions than those carefully prepared. For those who owe money to the IRS, filing early gives you more time to plan for the payment. Also, it’s much easier to get an appointment with a tax specialist early on rather than at the last minute.

Another reason you may not be aware of is that filing early is a proactive approach to avoiding tax fraud. Tax fraud occurs when social security numbers are stolen to create fake returns to file early. The return is processed, and the refund is issued. Then when the actual taxpayer goes to file, the return is rejected.

2. Change Your W-4

Single moms should review their withholding annually to make sure you’re not having too little or too much federal tax withheld. This review should be done sooner rather than later since withholding occurs throughout the year.

In general, withholding should be decreased if you are eligible for credits or deductions outside the standard annual deduction.

3. Update Your Filing Status

To file as head of the household, you must pay over 50% of the household expenses, not be married on December 31st of the tax year, and have to have lived together for over six months during that tax year. Filing head of the household reduces the single mom’s taxable income due to the higher standard income deduction.

4. Use a Cash-Back Credit Card

Generally, the IRS views cash-back rewards like discounts and not income. Discounts aren’t taxable. Some taxpayers earn hundreds of cashback dollars, points, or miles a year that result in revenue that is not taxable.

5. Start Saving For Your Child’s College Now

With the 529 College Savings Plan, interest earned is tax-free when distributions are used to pay for your child’s higher education. Some states also offer these income tax deductions or credits.

6. Check New Credits and Deductions

Not only are there credits and deductions for higher-education expenses, but there are also additional tax credits for single parents.

• Child Tax Credit. This tax credit is as much as $2,000 per child under 17. Up to $1,400 is refundable per child. A nonrefundable $500 tax credit is available for those who can not claim the Child Tax Credit. The phase-out for the upper limit of income for this single mom tax credit is $200,000.
• Earned Income Tax Credit. Some single moms may be eligible for the Earned Income Credit. Moms with income below specified amounts who file as single or head of the household can earn credits from $3,584 for one child who qualifies to $6,660 for three or more qualifying children.
• Child and Dependent Care Credit. You might be able to take advantage of the Child and Dependent Care Credit if care was provided for your 13-year-old or under while you searched for work or worked. The tax credit is based on 20% to 35% of a maximum of $3,000.
• Adoption Credit. The Adoption Credit allows the adoptive parent a maximum of $14,300 per child for qualified costs. If the credit exceeds what you owe in taxes, you can take the remaining credit over the next five years.

Some of these credits or a combination of credits can have a significant impact on your taxes.

Should You Talk With Professionals?

To take advantage of these savings, you have to know the qualifications for eligibility. These deductions, credits, and amounts change from year to year, and some of these tax credits for single mothers, along with deductions, are complicated. Unless you are a tax expert, it’s difficult to understand and stay on top of the IRS rules and regulations from year to year. That’s why it is to your advantage to consult with someone who is well-trained and has plenty of experience.

Contact local tax expert for financial advice to see if we can lower your taxable income and make the most out of credits and deductions as a single mother.