Tax Credits for Non-Working, Divorced, Stay-at-Home Moms

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Non-working, divorced and stay at home moms have a few key tax credits designed specifically for their situations. Learn about tax credits for non-working, divorced stay at home moms with help from a certified financial analyst in this free video clip.

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Video Transcript

Hi, my name is Noah Rosenfarb and I'm a certified divorce financial analyst with Freedom Divorce Advisers. Today we'd like to talk about tax credits for stay-at-home moms that are divorced. So it's important to know there's four different types of tax credits that the government offers to parents to help them offset the costs of raising children. The first tax credit that I'll tell you about is called the earned income tax credit and that credit can only be claimed by a custodial parent. So if you're a divorced stay-at-home mom and you claim your child as a dependent, that's fine but you have to also be the custodial parent, that means the child has to live with you for 50 percent or more of the year. The earned income tax credit is a refundable tax credit which means if you don't have taxes that you owe to the government, the government actually gives you money back so it's another form of social service that the government offers the Federal government to provide refundable tax credit to low income families. So each year the rules for what the income and earnings are that you could have vary so check with your accountant, with your tax preparer or do a quick search on eHow for figuring out what the earned income tax credit income limit is in the year that you're preparing your return. Another type of credit is called the Child and Dependent Care Credit and again this is a tax credit that's going to be claimed only by the custodial parent. It doesn't matter if your divorce agreement allows you or your former spouse to claim the child as a dependent, it's based on whom the child lives with. The important thing though is if you're a divorced stay-at-home mom, that means you're not going to have earned income and the Child and Dependent Care Credit is only good for those parents where they actually earn money by virtue of their efforts, not money that you might receive in alimony or child support or interest or dividends. So if you're working and you have to have dependent care costs, like your child is in daycare or aftercare at school, because you're working, then you might be eligible for that tax credit. The other type of tax credits are the Child Tax Credit and the Child Tax Credit follows whomever claims the dependent. So in your divorce agreement either you or your former spouse would be eligible to claim your child as a dependent on your tax return. Whoever has that benefit is the one that would be eligible for the Child Tax Credit. So the Child Tax Credit is $1,000 for each qualifying child and you want to make sure when you're negotiating your divorce agreement if you're not yet divorced, that you evaluate who is going to claim each child in which year and who would be eligible for this type of tax credit. The last tax credits are called Education Tax Credits and they apply to children that are receiving secondary education college education. There's two different types of college education tax credits and those are claimed by the parent that gets the dependent so again, in your divorce agreement if you are the one that gets to claim a child as a dependent and that child is going to college, then you are the one that would benefit from the education tax credit. If it's your spouse that gets to claim the child even though that child lives with you when they're home from school or they're going to school from home, they're not away at school, that's irrelevant to the IRS, they want to know that you are the parent that claims the dependent exemption. So if you are you'll be able to apply for The American Opportunity Tax Credit or the Lifetime Learning Credit and those credits are based upon where you are in school, whether you're in the first two years of your college education or your second two years. So make sure you speak with a qualified tax professional about the impact of these credits because they can be really significant and it's worth having some professional advice. I'm Noah Rosenfarb, a certified divorce financial analyst with Freedom Divorce Advisers.


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