The basic deduction everyone gets is an extra few thousand dollars of reduced tax liability from having a dependent. Be careful if you have a lot of children though- taking too many dependent deductions can trigger Alternative Minimum Tax.
Head of Household Filing Status
One big benefit of being a single parent is that you qualify for better tax status. Head of Household status is kind of a hybrid between Single and Married Filing Joint statuses, with higher levels that each of the tax brackets start at, and a higher standard deduction. Good to note that sometimes you can be married and still qualify, if you haven't lived with your spouse for half the year or if your spouse is a non-resident alien.
Earned Income Credit
This sizeable refundable credit will pay out thousands of dollars if you happen to fall in the right income bracket and have a couple kids you are supporting. For married couples the amount available as a credit increases to the income level of $23,630, then decreases and is fully eliminated around $50,000 in income. These amounts were just raised this year, and now more taxpayers will qualify. This is also a big benefit for self-employed taxpayers as refundable credits can be used to pay self-employment income.
Child Tax Credit
Child tax credit is a bit more simple to calculate. Basically you get a thousand dollar tax credit for each kid, also subject to income minimums and limits- or "phaseouts" as the government calls them- basically the amounts you get of these credits decrease as the income goes up through a certain dollar range. Child tax credit can be a standard credit or a refundable credit depending on income level and tax needs.
Child and Dependent Care Credit
Payment for care for your child or dependent can be deductible if you need the care to work or are a full time student. Be forewarned- if you file married filing joint and one spouse is unemployed and not a full-time student then you will not be able to claim this credit. Some states also have Child and Dependent Care Credits, California has one that is one of the few refundable credits in the state.
Does my child's school count?
Preschool and anything pre-kindergarten level counts as dependent care. However, private school for kindergarten level and above does not. But if the school has additional charges for after school care in order to allow parents to work, these amounts may be considered eligible for the credit.
What about summer camp?
Summer Camp is considered day care, yet individual classes during the summer are not. For example, Karate lessons would not be deductible, but an intensive Karate Camp program would be. If you teach children's classes- say arts and crafts, this is a good thing to know. Structure your program as a Summer Camp or Afterschool program, and your clients can get a tax benefit from their children learning a new skill.