If it is that time of the year again, where you sit and ponder over your tax forms for hours on end to ensure you leave nothing out, it might be time to consider another aspect. If you are single parent, you need to check out certain tax credits before you file your tax returns.
Tax credits mean that you are reducing the amount of tax that you have to pay to the government. Therefore, you should check out the seven tax credits listed below that you could avail of to help put money back in your wallet.
7 Tax Credits That Will Help Reduce Your Taxes
· Child tax credit- If you have a gross income of $75,000 or more, you can claim child tax credit, as a single parent. You can save almost $1,000 or more with this credit and if the credit is more than the tax you owe, you will be issued a refund.
But, there are certain criteria you should meet like the child should be less than 17 years, plus he must be directly related to you. You should have also ideally, have claimed your child as a dependent on your tax forms and must have supported the child financially.
· American Opportunity Tax Credit- College fees can get quite expensive and at times, it becomes difficult to handle it as a single parent. This is where the American Opportunity Tax Credit comes in handy as it helps you save on your child’s college tuition and lodgings up to $2,500.
You can only apply for this credit, if you claimed your child as dependent on the tax forms and if your income is $80,000 or less.
· Lifetime Learning Tax Credit- The Lifetime Learning Tax Credit is a good option for graduates and those doing professional courses. This is because this credit is applicable even after the first four years of college, whereas the American Opportunity Tax Credit can only be used for the first four years.
If your income is $63,000 or less, you can apply for this credit that saves around $2,000 on your child’s college tuition. But, you can only apply for either the American Opportunity Tax Credit or the Lifetime Learning Tax Credit and not both.
· Child and Dependent Care Tax Credit- If you are a working single parent, you generally might have to hire someone to look after your child or any dependent that has some sort of disability. This could be quite a costly affair but the Internal Revenue Service department offers you help in the form of the Child and Dependent Care Tax Credit.
You can save almost $3,000 on your childcare services for a single child, using this credit.
· Earned Income Tax Credit- If you have an income of $51,567 or less, you can file for an earned income tax credit. This category is more broad based, and can even be availed by people who are applicable for taxes.
The amount you save using this credit depends on the number of children you claim as dependents. For instance, you can save $6,143 if you have three or more kids, for two kids you can save $5,460, for one kid you can save $3,305 and $496 with no kids.
· Adoption Tax Credit- The Internal Revenue Service also offers you a credit if you have adopted a child under 18 years or who has a disability. This is the Adoption Tax Credit, where you can claim a maximum saving of $13,190.
To qualify for this credit, your income needs to be $197,880 or less.
· Premium Tax Credit- You can avail the Premium Tax Credit as soon as you sign up for the Affordable Care Act. This credit is mainly meant to help you save on your health insurance costs.
The amount you save with this credit is determined by the difference in the health insurance plan cost and how much you pay. It depends on how your income compares to the federal poverty rate.
You pay this credit direct to the insurer but you must mention it on your tax return, for it to be applicable. If you get a little extra income that month, you will have to refund the amount to the Internal Revenue Service.
Thus, it is important that before filing your tax returns you check out all the credits above, which will help you save on your taxes. You can save not only your child’s college fees and tuition, but also on your monthly health insurance and childcare services.
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