Tax Issues Single-Income Tax Filers Face During Income Tax Time

income tax filing

Not everyone makes millions every year; in fact, most of us make slightly (significantly) less than that each year. While it’s not true in every case, it’s typically the single-income families that make the least amount of money every year, and also the ones who have some of the most difficult issues with their taxes. Why? Because there are a few hurdles single-income families face each year at tax time, and sometimes those hurdles turn into actual problems. If you are a single-income family trying to maximize your income tax refund in 2015 or minimize your tax liability, you’ll want to know what potential problems you might face.

Child care credit issues

Sure, it’s nice to claim this credit when you can, especially since it’s worth up to $6,000 for a family with at least two kids. However, all parents on the return must be either working or in school full time. This means that a stay-at-home parent family doesn’t qualify. It’s a huge bummer for those with kids in daycare during the day.

Stay-at-home parents not saving for retirement

While it’s true that you typically do have to be a working parent to qualify to contribute to a traditional IRA or a Roth IRA, there are a few exceptions you should learn. If you are a stay-at-home parent, your working spouse can contribute up to $5,500 per year to a spousal-IRA. That allows you to not only save for retirement, but also to minimize your tax liability.

Not knowing how to file

If you are a single parent with kids you raise half the time or more, you should file as Head of Household. Many taxpayers think that if they are single, they have to file as a single taxpayer. The standard deduction for a Head of Household filer is more substantial and saves on your income taxes.

Opting for alimony instead of child support

The good news is that child support is considered non-taxable income. However, if you accept alimony payments from an ex, it’s considered taxable income. If you have a tight budget as it is, you might want to do the math before you label the income you receive as alimony. Go for the child support, instead.

Not getting healthcare for your non-working spouse

The Affordable Care Act Penalty is no joke. Unfortunately, a number of families in which the working spouse does not add the non-working spouse to his or her insurance are now paying a hefty fine. Everyone has to have insurance or they pay a fine. It’s just the way it is these days.

Photo by Getty Images

Comments

Leave a Reply

Loading…

0