Divorced with kids? There are tax issues you should know about
It’s that time of year when many Texas residents begin preparing their federal income tax returns. If you went through divorce last year and have children, there are several tax issues that you should know about.
First, it is important to determine if you can file head of household. This filing status typically allows you to be taxed at a lower rate and opens the door to many tax deductions and credits.
You may be able to file head of household if: you were unmarried on Dec. 31, 2014; you bring in at least 50 percent of your household income; and your children live with you for at least a total of six months out of the year.
Next, you should determine which parent is able to claim your children as dependents. This is something that is usually addressed in your divorce decree or separation agreement. If not, the IRS affords the right to the parent whom the child lived with, and was financially supported by, for at least six months out of the year.
For every child that you can claim as dependent, you can take a deduction of $3,950, though the amount fades out for heads of household who earn $279,650 or more.
You may also qualify for tax credits based on your dependent children. For example, single parents who earn $75,000 in AGI or less are able to deduct $1,000 for each dependent child who was 16 or younger on Dec. 31, 2014.
The earned income tax credit is also a possibility if you are a single parent and have three or more kids while earning less than $46,997, or if you have fewer children and earned a lower income. The earned income tax credit tops out at $6,143.
Talk to an experienced tax professional for more information about tax issues that apply to single parents and people who have recently gone through divorce.
Source: Forbes, “8 Things Single Moms And Dads Need To Know About Taxes,” Emma Johnson, Jan. 26, 2015