Doing It All on Your Own
Raising children alone puts you on a financial tightrope without a safety net.
By Jane Bennett Clark, Senior Associate Editor
From Kiplinger's Personal Finance magazine, April 2006
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Scout for tax breaks
Engel has one surprising ally in her efforts to make ends meet: the IRS. "Most single parents I've worked with do not have much of a tax issue," says Garrett. Parents who file as head of household, for instance, usually pay a lower tax rate and are entitled to a higher standard deduction than single taxpayers and married couples filing separately. Parents may also be able to take a $3,200 exemption for each qualifying child, plus a $1,000 tax credit for each child younger than 17 at the end of the year. (For more on the tax issues of divorced parents, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.)
If your kids are in day care so you can work, you're entitled to a dependent-care credit (up to $3,000 for one child younger than 13, and up to $6,000 for two or more). But if you can contribute to a flexible spending account, in which you may set aside as much as $5,000 in pretax dollars for child care, you're probably better off using the FSA. If you spend more than $5,000 on child care, you can claim the credit on up to $1,000 (see IRS Publication 503, Child and Dependent Care Expenses).
Michael Morton of Alameda, Cal., enjoyed another family-friendly tax break: a credit of $10,630 for adoption-related expenses (see IRS Form 8839). That baby-shower gift from Uncle Sam helped Morton, a single dad, defray the $25,000 it cost to bring his son, Thomas Anh Huy, home from Saigon, where he was born three years ago. "You just get a check back. It makes a big difference," says Morton, an operations manager for an online store.
Worried your child-support payments will bite back at tax time? Don't be. Whereas alimony -- a relative rarity these days -- counts as taxable income, child support escapes liability.
Ask for a little help
For all her coping skills, Engel often feels overwhelmed by the energy it takes to fly solo. "The biggest problem is not the finances but the stress itself," she says. "I'm all alone here. Other single parents have families to lean on. My family is in Russia. It's harder for us."
Still, her friends in Tucson provide a measure of solace and support. Lately, Engel has been dating a single father whose kids are the same age as hers and, she says, "sometimes we share advice on raising teens." Other friends fill more casual roles. "One is for talking about guys," says Engel. "Another is for going to the movies. Friends helped me find a lawyer and a mover. They helped me negotiate to buy a car. It's nice to have a network."