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Reducing the tax burden on a divorced individual

On Behalf of | Nov 30, 2018 | Income Taxes

Obtaining head of household status can be a boon for divorced parents who meet the criteria for it. Among the benefits is a standard deduction of $18,000 as opposed to $12,200 for those who file single. Furthermore, individuals who have the head of household status can claim a $2,000 child tax credit. Unlike a deduction that reduces a person’s taxable income, a credit actually reduces what a person owes by the amount of the credit.

Head of household status also offers wider tax brackets, which could cut down on taxes owed in a given year. While there are many benefits to having this status, it can be hard to qualify for. First, a parent must have a child living in his or her home for more than half of the year. In addition, a parent must also pay more than 50 percent of the household expenses. Expenses include paying a mortgage, buying food or any other cost related to keeping the home in order.

Parents who have multiple children are encouraged to create custody agreements that allow each of them to obtain head of household status. This can be done by allowing each parent to have one child for 50 percent of the year plus one day. Such an arrangement may offer tax benefits while allowing parents to create equitable custody terms that benefit the children.

Whether a person is married or divorced, he or she is generally required to pay income taxes on money earned in a given year. An enrolled agent or tax attorney may be able to provide guidance for those who need help preparing their returns. Individuals may also seek out a tax attorney to provide assistance in the event that they are audited or have otherwise been contacted by the IRS.