SINGLE PARENTS

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Taking proper care of financial matters is a source of pride for most people. That�s why "J.L. Galang" has put togethered some useful tax tips to help minimize your tax.

As a single parent, you need to know how to handle certain items that go on your tax return. Remember, though, that this brochure contains general information. Each individual�s situation differs. That's why we suggest you consult with an experienced "J.L. Galang" tax return preparer well in advance of filing your tax return. That way, you will be assured of receiving the best advice for your particular situation.

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FILING STATUS

Be sure you use the correct filing status:

1. Married Filing Jointly

2. Single

3. Head of Household. (You may get a lower tax rate and a higher standard deduction than if you file as Single if you provide a home for an unmarried child, a dependent parent, or other dependent relative.)

4. Qualifying Widow(er). (If your spouse died in 1995 or 1996, you did not remarry in 1997, and you provide a home for a dependent child, you may use the Married Filing Jointly tax rates.)

5. Married Filing Separately

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CAN YOU ITEMIZE?

Compare the amount of your itemized deductions to your standard deduction. If your deductions exceed the amount of your standard deduction, you may itemize. Save all your receipts and records for anything you know or believe may be deductible. There are hundreds of possible deductions that may apply to your situation. If you want to know which deductions you can use, talk with your "J.L. Galang" tax return preparer.

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CUSTODY AND EXEMPTION

• In general, the parent who has custody of the child for the greater part of the year the right to claim the exemption for the child unless he or she signs a statement waiving the exemption for one or more years, or the noncustodial parent contributed at least $600 toward the child�s support during the year AND a valid pre-1985 divorce decree or written agreement specifies that this parent is entitled to the exemption.
• You must enter on your tax return the Social Security number of any dependent child born before December 1, 199
• Child support payments are neither deductible by the payer nor taxable to the recipient. Qualified alimony payments are deductible by the payer and taxable to the recipient.

TAXES AND YOUR CHILDREN�S INCOME

• If you are eligible to claim your child as a dependent, your child may not claim a personal exemption on his or her own tax return.
• Your dependent child�s standard deduction is limited to the larger of (1) $650 or (2) the amount of his or her earned income, but not more than $4,150 if your child is single or $3,450 if your child is married and filing a separate return.
• If your child is under age 14 at the end of 1997 and received over $1,300 of unearned income, part of that unearned income may be taxed at your tax rate. Unearned income is income from interest, dividends, annuities, and trusts.
• If your child received a scholarship granted after August 16, 1986, and spends any part of the proceeds for items other than tuition, books, and other course-related supplies, that part of the proceeds is taxable. The most common example of taxable scholarship proceeds is that amount used for room and board.

CHILD CARE CREDIT

If you are an unmarried custodial parent, you can claim this credit for a child you do not claim as a dependent if you gave the right to claim the child�s exemption to your ex-spouse.

The credit ranges from 20 to 30 percent of your child care expenses, depending on your gross income. The limit on the amount of the expenses you may use for calculating the credit is $2,400 for one dependent child or qualifying individual and $4,800 for two or more.

Child Tax Credit

Per Child Credit

• $500 per qualifying child ($400 for 1998).
• Reduced in $50 steps for each $1,000 (or fraction thereof) over threshold.
• Threshold is $110,000 for joint returns, $75,000 for single or head of household returns, and $55,000 for married filing separate returns.
• Interacts with other non-refundable credits and with the earned income credit. It may also be affected by the amount of Security Security and self-employment taxes paid.
• Special rules for taxpayers with three or more children.
• Not based on earned income.

Qualifying Child

• Must be your dependent under the age of 17.
• Must be your child (or a descendent of your child), stepchild, or foster child.
• No limit on the number of qualifying children.

EARNED INCOME CREDIT

As a single parent, you may be entitled to the earned income credit which, depending on your current circumstances, could mean an additional refund or reduced tax liability of over $3,656. You may be eligible if your earned income and adjusted gross income are less than:

• $25,760 and you have one qualifying child, or
• $29,290 and you have two or more qualifying children, or
• $9,770 and you have no qualifying children.

If you think you are eligible for the earned income credit, check with your "J.L. Galang" tax return preparer to make sure you take full advantage of this tax break.

Savings/IRAs (Individual Retirement Accounts)

Tax deductible IRAsS

• New IRA rules make IRA benefits available to more middle and upper-middle class taxpayers.
• Incremental increase in income limits for active participants. For 1998, joint filers have a phaseout limitation of $50,000 to $60,000 (single filers $30,000 to $40,000). By year 2007, joint filers have a phaseout limitation of $80,000 to $100,000 (single filers phaseout between $50,000 and $60,000).
• Effective January 1, 1998, spouses contributions are no longer limited by the other spouse�s active participation in a qualified plan for couples earning less than $150,000.

New Roth IRAs -Nondeductible Tax-Free IRA