Tax Tip for Families with Single Parents- (Tax Year 2002)
by Shannon Nash, Esq., C.P.A.

Single parents have special tax issues that bear mentioning. The following is a list of issues that apply uniquely to single parents.

Head of Household
Many single parents will be able to file their tax returns using the head of household filing status. This status is generally financially better than filing single or married filing separately – the next best thing to married filing joint. For head of household status to apply, the single parent must provide more than half the costs of keeping a home for at least one child (i.e., costs like rent, mortgage, interest, taxes, insurance, repairs, utilities and food eaten in the home).

For divorced, legally separated, or married parents who have been separated (i.e., living apart) for 6 months, the custodial parent (the parent who has physical custody of the child for the longest during the year) is generally treated as providing more than half of these costs. Under this special rule, neither the amount of child support or alimony paid is relevant. Thus, unless the custodial parent gives up her claim on the child, the custodial parent will be able to file using head of household status.

Child Credit
Parents can get up to a $600 child credit for each child. However, only the parent who can claim the child as a dependent can claim this child credit.

Child Daycare Credit
Working parents can claim a credit for certain day care expenses. Only the custodial parent can claim this credit.

Innocent Spouse
For divorced parents there is often an issue as to which partner is liable for tax liabilities incurred prior to the divorce. Sometimes these liabilities are explicitly covered in the divorcee decree settlement. But other times they are not and the IRS can come after both spouses for any unsettled tax bills, even when only one spouse created the liability in the first place. Seem unfair? Well now, under innocent spouse relief, the IRS may relieve the one spouse from paying these taxes and penalties created by the former spouse.

Alimony and Child Custody Payments
A single parent who receives child support payments, does not have to include these amounts as income. But, alimony payments are treated as income. The parent paying the child support cannot deduct these payments but that parent can deduct any alimony payments.

Medical Expenses
Each parent can claim the medical expenses he or she pays for the child, regardless of which parent can claim the child as a dependent on their tax return.

Resources
• IRS’s website – http://www.irs.treas.gov
• Head of Household and Divorce Issues -- IRS Publication 504, Divorced and Separated Individuals and Form 8332
• Release of Claim to Exemption for Child of Divorced or Separated Parents
• Innocent Spouse Relief -- IRS Publication 971, Innocent Spouse Relief
• Child Tax Credit -- IRS Publication 972, Child Tax Credit
• Medical Expenses – Publication 502, Medical and Dental Expenses
• Child Daycare Credits – Form 2441,Child and Dependent Care Expenses and Publication 503, Child and Dependent Care Expenses
• Alimony and Child Support -- IRS Publication 504, Divorced and Separated Individuals


Shannon Nash is a tax attorney and C.P.A. She received her Bachelor’s degree in accounting from the University of Virginia, McIntire School of Commerce and her law degree from the University of Virginia School of Law. She is a member of the Virginia and Washington D.C. bar and holds a C.P.A. license from the State of Virginia. She is an officer of the American Bar Association and Chair of the National Bar Association Tax Section. Shannon lives in Westlake Village, California (outside of Los Angeles) with her husband, an ex-submarine officer, and her son. She also writes the "Special Needs Journey" column.


March 15, 2003