Ways Single Mothers benefit from the U.S. Tax Code

Earned Income vs Unearned Income

According to United States Tax Code, there are 2 types of income that Americans generate. The first type of income is called Earned Income. Here are some examples of Earned Income; wages, salaries, tips, long term disability payments, union strike benefits, etc. The second type of income is Unearned Income. Unearned income can be in several forms from unemployment benefits, taxable Social Security benefits, child support, taxable pensions, cancelled debt, etc. Other forms of non-taxable income are alimony, welfare benefits, and compensatory legal damages.

Filing Status

When single mothers are legally designated as the Primary custodial parent, they are entitled to designate each of their children as a “Qualifying Child” on their Federal and State Income tax forms. There are 2 types of filing statuses that single parents can file: Head of Household or Married Filing Separately ($6,300). The most common filing status for single mothers is called Head of Household ($9,300). After the Primary Custodial Parent claims their personal deduction, they can claim their exemptions. Each Qualifying Child equals ONE EXEMPTION. The personal exemption amount for the Tax Year 2016 is $4,050. The more Qualifying Children that the Custodial Parent has, the more exemptions that they can claim.

Earned Income Credit

The Internal Revenue Code grants low income workers a significant credit. This tax credit is called the Earned Income Credit. It is granted to low income families. The Earned Income Credit is granted based on the income and size of the family. The maximum amount a single parent can earn and still claim this tax credit is $39,296. Let’s view the Earned Income Credit thresh hold:

      • Parent with one child that earns under $9,920= $3,373
      • Parent with 2 children that earns under $13,930= $5,572

 

  • Parent with 3 or more children that earns under $13,930= $6,269

 

The maximum income that the single parent can earn and still receive the Earned Income Tax Credit is $47,955. As we can see, the more children the single parents have, the more tax credit they are granted.

Child Tax Credit

The Child Tax Credit was designed to offset many expenses of raising children. It can be worth as much as $1,000/ child. The tax credit is claimable for children under the age of 17 years old. The Child Tax Credit is phased out for Single Filers and Head of Household filers at $75,000.

Other Tax Deductions

Single Parents are entitled to several deductions from the Internal Revenue Code. Some of these deductions are abortions, dependent care costs, and legal fees, if they are a potential recipient of alimony and hires an attorney to assist them in getting alimony from their soon-to-be-ex spouse.

Hypothetical Examples:

ShaQuana Jackson had one child (Donovan ALI) worked as a waitress, and earned $10,480 for 2016. After all of her tax credits and deductions, her Federal tax refund would be $5,089.

ShaQuana Jackson had two children (Donovan ALI, Dean Duke) worked as a waitress, and earned $10,480 for 2016. After all of her tax credits and deductions, her Federal tax refund would be $6,029.

ShaQuana Jackson had three children (Donovan ALI, Dean Duke, Samantha Sharp) worked as a waitress, and earned $10,480 for 2016. After all of her tax credits and deductions, her Federal tax refund would be $6,553.

Child Support Payments

Remember, ShaQuana Jackson earned $10,480 from her waitress job.

$10,480/50 weeks = $209.60 (Weekly Salary/Earned/Taxable Income)

Fathers

Dr. Oshay =$450/week

Prentis =$300/week

Ray Ray =$55/week

Total Child Support Payments=$805/week (Unearned, Untaxable)

Total Yearly Child Support Payments= $41,860 (Unearned, Untaxable)

Total Annual Income = $52,340

Summary

In the year 2016, ShaQuana Jackson’s total household income was at least $52,340. The words (AT LEAST) were used due the fact that the reported “TIP EARNINGS” were at least $10,480. Since ShaQuana earned $10,480 dollars of Earned Income, she will only be taxed on the $10,480.

 

 

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