Standard Deduction

• The standard deduction you can subtract from your income to arrive at the amount you must pay taxes on can significantly reduce your tax bill. The lower your tax bill is, the more likely it is that a refundable credit will result in money in your pocket. Such a credit first goes to eliminate your tax obligation, then you get the rest. As of the time of publication, this deduction was $11,600 for married couples filing jointly, $8,500 if you file as head of household and $5,800 if you file a single return. Head of household is a desirable filing status for single parents who pay more than half their household’s expenses. You can also claim dependency exemptions of $3,700 for each of your children as of the time of publication.
  
  

Itemized Deductions

• You have the choice of itemizing your deductions rather than taking the standard deduction. This generally is not as advantageous for low-income families because you would have to spend more than the standard exemption amount on certain expenses to make it worthwhile. However, if you or one of your dependents is chronically in need of medical care not covered by insurance, taking itemized deductions might work better for you than for a high-income earner. Your medical expenses must exceed 7.5 percent of your adjusted gross income (AGI) before they’re deductible. The lower your AGI, the more medical expenses you can claim. Allowable medical expenses cover a wide range of costs, so this might lower your tax bill even more than the standard exemption would.
  
  

Earned Income Tax Credit

• The federal government designed the earned income tax credit specifically for low-income families. After you whittle away at your taxable income through deductions and determine how much you owe the IRS in taxes, the EITC can eliminate your tax bill and, if there’s any left over, the IRS will send you a check for the balance. As of the time of publication, if you’re a single parent with two children and your AGI is less than $40,954, your EITC would be $5,112. If you owe minimal or no income tax because your income is low, the IRS will write you a check for most or all of this amount.
  
  

Other Credits

• The IRS offers other credits that might result in a larger refund to you. The Making Work Pay tax credit, part of the American Recovery and Reinvestment Act of 2009, is refundable and will pay you $400 if you’re single, $800 if you’re married. Although the child tax credit is generally not refundable, a portion of it may be for some low-income families. Even if you don't qualify for a refundable CTC, it can eliminate your tax bill so your refundable credits don’t have to, resulting in a larger refund to you. The CTC amounts to $1,000 for each of your children.