Tax filing status has a significant impact on your eligibility for deductions, as well as what you owe for federal and state taxes, so it is imperative that the correct status is selected when filing.
Currently, there are five tax filing status options, and in certain situations, you may qualify for multiple statuses. Following are the five status types and the requirements to qualify for each.
Head of Household
The tax filing status Head of Household option qualifications are:
-You must be unmarried and support others in your household. Note that the IRS qualifications for “unmarried” is either you are not legally married or your spouse did not reside in the home for the last six months of the tax year.
-You paid more than half of home expenses for the tax year. Note that the IRS approved home expenses include property taxes, mortgage interest or rent, utilities, repairs and maintenance, property insurance, food, and other household expenses.
-Your current home was your child’s main home
-You must have at least one dependent. For a dependent to qualify, the individual must be:
-A child under the age of 19, or a student under the age of 24 that lives in the house at least 6 months of the year
-A parent, sibling, or in-law who you provided at least half of their support for the tax year. It is not required for these individuals to reside in the house.
The benefit of filing has Head of Household versus Single is bigger tax deductions and more favorable tax brackets.
Qualified Widow or Widower
To qualify for this tax filing status, it is required that the individual filing the tax return should have recently lost a spouse and be supporting a child in the household. Note that the individual can qualify for this status:
-The year in which the individual lost their spouse
-The preceding two years as long as the dependent child still resides in the household
The benefit of filing as Qualified Widow or Widower versus Single is the individual still receives the same deductions as if filing as Married Filing Jointly.
Married Filing Jointly
This is the most common tax filing status. To qualify for this tax filing status, it is required that both individuals report income and claim allowed deductions and credits on the same forms. This status does not require both individuals to have an income or be able to claim deductions. Note that the IRS will not consider a couple married if they are legally divorced by the last day of the tax year. Also, if the individual’s spouse died during the tax year, the surviving individual is still allowed to file as Married Filing Jointly.
The benefit of filing as Marring Filing Jointly is eligibility for deductions and credits that are not allowed if filing as Married Filing Separately.
Married Filing Separately
This status is common for couples that are married but are in divorce proceedings or if your spouse has existing tax problems. This status may be beneficial if the individual is on a student loan repayment program or if the couple resides in a community property state (i.e. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). Note that married couples that file separately are not able to:
-Deduct student loan interest
-Take the credit for child and dependent care expenses
-Take the earned income tax credit
-Deduct adoption expenses
-Take the American Opportunity or Lifetime Learning Credit
Additionally, the following will impact deductions and credits:
-You can only take half of the standard deduction, child tax credit, or deduction for retirement savings contributions
-You can only deduct $1,500 of capital loses (instead of $3,000)
-You must itemize deductions if your spouse itemizes deductions
This status is for individuals that do not fit into the other filing statuses. Note that the IRS considers an individual unmarried if the individual is divorced by the last day of the tax year.
The benefit of filing Single is qualifying to pay lower taxes for those that are in high income brackets.