Don't Mess With Taxes

This post was reviewed and updated Friday, May 11, 2018.

Happy Mother's Day!

 There's no better Mother's Day gift for mom than a homemade "<3 U Mommy" message. (Photo by Donnie Ray Jones via Flickr)

Whether you are a mom, have a mom, are planning to become a mom, or are married to a mom, chances are you're taking part in a special celebration this Sunday. Enjoy!

Millions of magnificent moms: While mothers often feel like they're all alone when it comes to their kids, some data from the U.S. Census Bureau shows that all types of mothers have lots of company.

Overall, there are 43.5 million women between the ages of 15 and 50 who have children. Almost 4 million of those moms had their babies in the past 12 months.

And just how many babies are we talking? Almost 96 million. That, my friends is a lot of diaper changing and sleepless nights, from 3 a.m. feedings to teenagers out in the family car.

It's also a lot of numbers, but since this coming May 13, 2018, is Mother's Day, the country's 43.5 million moms get this week's early By the Numbers honor.

Moms at work, work, work: Many moms' full-time work is being a stay-at-home parent. But, according to IRS data, more than 62 percent of women ages 16 to 50 with babies a year-old or younger are part of the outside-the-house workforce.

Regardless of the type of jobs these women have or where they do it, they need more than our love and respect. Many need help.

Some of that help for some moms comes from the tax code.

Since this is a tax blog, my small but heart-felt gift to all moms this Mother's Day 2018 (and this week's Weekly Tax Tip) is still more Census figures, along with three mother-related tax-saving tips.

1. Filing status for moms on their own: In 2016, there were 9.8 million single moms caring for children younger than 18. That's a substantial increase from the 7.7 million the Census tallied in 1985.

In these cases, the moms likely will qualify to file their returns as head of household. This filing status is more beneficial than that of a single taxpayer. As a household head caring for a minor child, mom gets a larger standard deduction — substantially larger at $18,000 starting in 2018 under the Tax Cuts and Jobs Act (TCJA) changes — amount.

Even under the prior tax laws, which are still in effect for 2017 tax returns that some moms (and others) are still working on thanks to a filing extension, the head-of-household standard deduction amounts of $9,350 is much larger than the $6,350 allowed a single taxpayer.

Note, however, that the TCJA eliminates personal exemptions starting in 2018, so parents won't get that additional amount to subtract from their tax returns.

2. Child care tax credit: These single moms (and married ones and dads, too) also should look to the tax code for some help in taking care of their kids.

There are plenty of places willing to help a mom out. The Census Bureau says there were 868,975 people employed at one of the 74,344 child day care services across the country in 2014. In addition, there were 688,728 child day care services without paid employees in 2013. Many mothers turn to these centers to help juggle motherhood and careers.

To help cover those care costs, a working mom can claim the child and dependent care tax credit.

This tax break covers up to $3,000 spent on folks who help look after one child or up to $6,000 for the care costs two or more kids. The Census Bureau says that 17 percent of women age 15 to 50 have one child, another 22.3 percent have two, 11.7 percent have three, and about 6.8 percent had four or more.

Unfortunately, regardless of the number of children, your tax break isn't the same as the allowable costs limit.

Your actual credit claim is a percent of those costs (maximum of 35 percent) that is based on your adjusted gross income. So you must do some math to come up with your exact tax credit amount.

The bottom line is that the potential maximum child care tax credit is $1,050 (35 percent of $3,000) for the care of one child, or twice that for two or more kids' care costs. Even I, a child-free person, know that $1,050 or $2,100 is going to cover only a fraction of your kiddos' care costs, but at least this is a tax credit. That means it's a dollar-for-dollar reduction in what you owe Uncle Sam.

And don't forget that summer day camp costs also count as creditable day care costs for the purposes of this tax break.

3. Retirement help for stay-at-home moms: As noted earlier, some mothers opt to leave the workforce to care for their kids. Census data show that in 2016 there were 5 million such in-house caregivers.

And while taking care of a family is a full-time job, you don't get the kind of compensation that is required to contribute to an IRA or other retirement plan.

The tax code, however, can help here if you're married. In certain circumstances you could qualify for a spousal IRA, once known as a homemaker IRA and officially renamed the Kay Bailey Hutchison IRA in 2013 after the U.S. Senator from Texas who co-authored the law that created it.

A Hutchison/spousal IRA is the same as a regular IRA, except that it is opened in the name of an unemployed spouse and contributions are made by the employed husband or wife. For the 2018 tax year, if you and your spouse file a joint return, up to $5,500 ($6,500 if you are 50 or older) can be contributed to a Hutchison IRA.

The money put into a Hutchison IRA grows tax deferred until it is withdrawn. In some cases, the spousal IRA contributions also might be tax deductible when the couple files their annual tax returns.

But mainly, this retirement savings options will help moms who don't work outside the house build a nest egg. You and your kids will be glad that you'll have some financial independence in your golden years.

But before you get there, enjoy today — and every day — with your family. Here's hoping this Mother's Day is especially great!

You also might find these items of interest:

• How kids can help cut your tax bill (Best. GIF. Ever.)
• 2 sets of twins born just minutes, but tax years, apart
• 5 tests a child must meet to be claimed as a tax dependent