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10 Tax Credits for Single Parents

        Money | Taxes

2
529 Plan
It's not a credit, but a 529 plan can help single parents at tax time. XiXinXing/ThinkStock
It's not a credit, but a 529 plan can help single parents at tax time. XiXinXing/ThinkStock

A 529 plan isn't a federal tax credit, but it's just as important. Especially for single parents whose children may someday attend college or post-secondary career training. You can even set up a 529 plan and name yourself as the beneficiary, something that could help you financially if your goal is to further your education. If plans change, you can change the beneficiary at no cost.

Essentially, a 529 plan is a state-administered savings account for college. The owner of the 529 account will make after-tax contributions into the account. As the contributions and interest add up, the earnings are not subject to federal tax as long as they are withdrawn for tuition and other qualified expenses, such as books, room and board and other fees [source: IRS].

The maximum contribution you can make to a 529 plan varies by state and there are lifetime limits to a 529 plan, which also vary. The important thing is that you do not make contributions that exceed the potential qualifying expenses because any leftover earnings could be subject to tax and penalties. That said, it is possible to rollover or transfer earnings or change the beneficiary to another eligible family member, such as a niece or nephew, or first cousin [source: Appleby].


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