Once the divorce is finalized, it is crucial to take proactive measures to prepare yourself financially for the future. One of those steps is understanding how child dependency exemption and child tax credit may impact you.
How Child Dependency Exemptions Works?
Child dependency exemptions allow single parents to reduce their taxable income by including a child on their tax return. This exemption can provide an important financial boost for divorced parents who are struggling financially, as it reduces overall taxable income and thus the amount of taxes owed.
The Child Tax Credit is another option that many divorced parents may be eligible to receive. This credit is available for each qualifying child that a taxpayer has, and it can reduce the taxpayer’s total tax liability by up to $1,000 per child. However, taxpayers must meet certain income requirements in order to qualify for this credit.
It is important to understand both of these options as they can provide significant financial relief when preparing your taxes after a divorce. It is also important to note that the IRS has specific requirements for who can claim these exemptions and credits, so be sure to speak with a trusted financial advisor to ensure you are taking full advantage of any available tax benefits. These tax benefits can help reduce overall taxable income and make filing taxes after a divorce less stressful.
Take Into Considerations
It’s important to take the time to understand your financial situation after a divorce and speak with a trusted financial advisor about what steps you can take to ensure that you are in the best possible position for your future. As navigating the world of taxes after a divorce can be complicated, it is always advisable to consult tax professionals when making decisions about claiming exemptions or credits. With top-notch advice from a financial advisor, you can be sure that you are taking all the necessary steps to prepare for your future.
The Child Dependency Exemption and Child Tax Credit provide important tax benefits for single parents going through a divorce. It is essential to understand how these options could impact you so that you may make the most of them in order to reduce taxable income and ensure a more secure financial future.
Work with us
If you have more questions about divorce, our team is here to help you every step of the way. At Purposeful Wealth Advisors, we work closely with divorce attorneys, accountants, and other dedicated professionals to arrive at comprehensive solutions for our clients.
We can help you understand your rights and obligations when it comes to child support.
Contact us today to know more!