Tax Credits for Low-Income Moms

Single mothers face many challenges, but tax season can provide a bit of a financial boost. Tax credits increase the amount of money taxpayers keep, and several tax credits provide single-parent households this added benefit. Tax credits reduce a taxpayer's liability, or required tax payment, which causes the taxpayer to either break even, owe less or receive a refund. Several credits provide relief for single parents, low-income households, those pursuing an education and those who spend their money on caring for dependents.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) reduces the tax liability of low-income earners. The government designed the credit to encourage employment and disperse income to low-income households. Qualifications for the credit include income, household composition and dependent and citizenship status. The EITC places an eligibility cap on earned income based on family size. For example, a single mother could earn no more than $43,352 if she claimed three or more children in the 2010 tax year. Taxpayers who use the credit can receive a refund, which is based on several factors, and can claim the EITC on Internal Revenue Service (IRS) form 1040 or 1040EZ.

Child Tax Credit

The Child Tax Credit (CTC) provides up to a $1,000 credit for dependent children for married or single tax payers, which can result in a refund. For example, if a taxpayer owes $1,000 in taxes and has two qualifying children, the credit can reduce the liability by up to $2,000. The taxpayer may receive the excess $1,000 as a refund through the Additional Child Tax Credit. The taxpayer must care for a descendant, sibling, stepchild or adopted or fostered child under the age of 17 to qualify. Taxpayers can use IRS form 1040 to claim the credit.

Child and Dependent Care Credit

Many single mothers pay an outside party to care for their children while they work. The Child and Dependent Care Credit reduces tax liability for qualified care expenses. The total amount of the credit will not exceed 35 percent of qualifying payments and tax payers can claim up to $6,000 for two or more dependents. The IRS provides form 1040 to claim the credit.

American Opportunity Credit

Single mothers working on a post-secondary education can reduce their tax liability using the American Opportunity Credit. The credit reduces tax liability for qualified expenses, such as tuition, books and other materials associate with achieving a post-secondary education. The credit provides a refund of up to 40 percent of a tax payer's credit eligibility, according to the IRS. This credit can also be claimed on form 1040.

References

• Internal Revenue Service: Earned Income Tax Credit Questions and Answers
• Internal Revenue Service; Ten Facts about the Child Tax Credit; February 2011
• Internal Revenue Service; Ten Things to Know About the Child and Dependent Care Credit; March 2011
• Internal Revenue Service: American Opportunity Credit: Questions and Answers