Financial Benefits Relating To Your Kids You May Gain Through Your Divorce
If you are currently going through a divorce and will be getting custody of your kids, you may be worried about how you will support yourself and your kids on your own. While it can be hard for single parents to do this, there are several different benefits you may receive when you have custody of your kids, especially if you do not earn a lot of money. Here are four important benefits you may be able to take advantage of after your divorce.
Child Support
The first financial benefit of having custody is the ability to receive child support. Child support is paid by the non-custodial parent to the custodial parent and is designed to help the custodial parent provide food, clothing, shelter, and other basic needs to the children. Child support is typically paid weekly, but can also be paid monthly, and it is usually calculated by comparing your income with your spouse's income. If your spouse earns a lot of money and you earn very little, you will receive more child support than you would if your spouse did not earn a lot of money compared to your income.
While the income you earn from your job might not be enough to support yourself and your kids, adding in your weekly child support payments might help you have enough money each month for your bills, food, and other necessities. It's also important to know that you are not required to list child support payments on your taxes as income, which means these payments are not taxable.
Claiming Them As Dependents
In addition to receiving child support payments, having custody of your children can also help you by offering several different tax benefits. The first one involves the ability to include your children as dependents on your taxes. A dependent is basically someone that you support, and you can include yourself and the children that live with you as dependents. Each dependent you include on your taxes will provide you with a $4,000 tax write-off for the year (this amount is based on the IRS limits for 2015).
This write-off is helpful because it reduces your taxable income. With lower taxable income, your tax liability will be less, and this can help you save a lot of money on taxes. For example, if you earn $30,000 and have two children, you can write off yourself and the two kids as dependents. This will reduce your taxable income by $12,000 ($4,000 times 3 dependents), which means you will only have taxable income of $18,000.
Earned Income Credit
Another tax benefit you may be able to take advantage of is the earned income credit (EIC). Earned income is a credit you can qualify for if you have very low income, and the amount of credit you can take depends on the amount of your income and the number of children you have. It is designed to help people that work but do not make a lot of money.
If you qualify for the earned income credit, you might end up receiving a large tax refund each year. This occurs because the amount of EIC you are eligible for will come directly off the amount of taxes you owe after calculating your taxes. If you do not owe any taxes, you still get the credit, and the credit will be in the form of a tax refund check.
While there are strict rules relating to qualifying for this credit, you will most likely be eligible if you work, have children, and earn a low income.
Child Care Write-Offs
Finally, you may be able to write off some of the child care costs you incurred during the year. If you have young kids and have to pay a babysitter to watch them while you work, the IRS will allow you to write off 35% of the amount you paid during the year up to a certain limit.
Being a single parent can be hard in many ways, but taking advantage of the tax benefits listed here could be helpful for your finances after your divorce. If you would like to learn more about how your divorce will affect you financially and other tax benefits, contact a divorce lawyer like Harold Jarnicki Attorney At Law today.
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