When you file your tax return, ensuring you used the right filing status can make a big difference to your wallet. Depending on which status you use, you’ll be eligible for different credits and deductions, and how much of them you are entitled to.
There are five filing statuses, and each one affects your tax bill in different ways. You should use whichever status you’re eligible for that gives you the best benefits. Read the following to determine the different tax statuses and the benefits they bring.
Generally, each of the statuses apply to a specific group of taxpayers. Choose the option that fits you best.
- Head of Household: Single taxpayers who provide at least half of the housing and expenses for the others in the household.
- Qualified widow(er): Those who have lost a spouse and have a qualifying child in the household to whom they provide support.
- Married, filing jointly: A married couple that combines their income into a single tax return.
- Married, filing separately: Those who benefit from keeping their income separate from their spouse, who may have tax liability, or other income that they don’t include.
- Single: Unmarried taxpayers who don’t fit the qualifications for any other statuses.
Head of Household
Taxpayers are eligible to use the Head of Household status if they paid 50% or more of the expenses required to keep up a home, or provide all of another person’s support for at least half of a year. Those who just run the house or manage their family generally can’t claim this status, even if they make the most money.
Anyone who is not legally married is considered to be single by the government. Additionally, anyone who lives separately from their spouse for at least the final six months of the tax year (excluding temporary absences), you can be considered unmarried. For this type of unmarried taxpayer to claim the head of household status, they also have to supply the cost of expenses for their child’s main home. Household expenses include property taxes, mortgage interest and rent, utilities, repairs, maintenance, property insurance, food, and other expenses.
The Head of Household status requires the taxpayer to have a “qualifying person”, which generally includes children under age 19 (24 for students) who spend more than half the year in your home. In some cases, the parents of the taxpayers can also be a qualifying person, and they aren’t required to live with the taxpayer. However, the support parameter still applies, and the taxpayer must prove they provide at least 50% of their parent’s support. Sometimes, siblings and in-laws may also qualify if you provide their support.
By filing head of household, you are eligible for bigger deductions and exemptions. Head of Household gets a standard deduction of $9,300 compared to $6,300 for single filers. Itemized deductions aren’t limited until you make $284,050, whereas single filers are limited at income of $258,250.
Taxpayers who lost a spouse during the tax year and are supporting a child are qualified to file a tax return using the qualified widow(er) status. As long as you were eligible to file a return using “married filing jointly”, regardless of if you did or not file that way originally, you are eligible to file using the qualified widow(er) status for the following two years.
Example: A taxpayer’s spouse dies in 2016. The taxpayer has not remarried, so they are still able to file their 2016 return using married, filing jointly. In 2017 and 2018, the taxpayer should use the qualified widow(er) status for their tax returns.
You have to have children living in the house with you in order to qualify. If your children have moved out, you probably won’t qualify. In addition, you have to be responsible for over 50% of the expenses incurred for maintaining the household during the tax year.
By filing as qualified widow(er), you are able to reap all the benefits of a married couple who file a joint return. This equals a higher standard deduction and a different tax bracket than if you simply filed as single.
Married, Filing Jointly
Most married couples chose to use the married, filing jointly status, which combines the incomes of both spouses into a single amount in which to be taxed. Even if one half of the couple had no income or deductions, the married taxpayers can opt to file a joint return.
Taxpayers who became legally divorced during the tax year, are considered unmarried by the IRS for the entire tax year, regardless of the day the marriage was terminated. That means even if the couple was divorced on December 31st, they must file their tax return as if they were single.
Conversely, a taxpayer whose spouse died during the year is considered to be legally married for the entire portion of the year. You are eligible to continue to file a joint return for that tax year, and depending on specific qualifications, such as having children in the house, you may be eligible to file as a qualifying widow(er) for the two years following the spouse’s death.
Taxpayers who file jointly are equally responsible for the taxation of their income. This means that both parties are accountable for any interest or penalties that may accrue, so if you plan to file a joint return, you should ensure your spouse pays any amount due and that your return and calculations are accurate.
Generally, couples receive a lower rate of taxation when filing a joint return over a separate return. Those who opt not to itemize may see a higher standard deduction and an increase in the amount of deductions and credits that are applicable to their return using this status.
In some cases, married couples may want to keep their incomes separate. This happens when both parties are high earners, there’s suspicion that one spouse may be hiding income, or there is tax liability issues.
Example: A married couple is in the process of divorce, and the wife is unsure that the husband is fully documenting his income. A couple is recently married, and the wife is bringing an unpaid tax bill into the relationship. In both situations, it may be advisable to file a separate return.
Married, filing separately is different than using the Single status to file a return, as the latter is only available to those who are not legally married. The two statuses have completely different tax brackets as well.
In many cases, taxpayers who file separately have a higher tax liability than filing jointly, as there are less credits and deductions available to this filing status. For example:
- Not eligible for student loan interest deduction
- Not eligible for the Child and Dependent Care Expense Credit. (Employer sponsored dependent care assistance can be excluded from income at 50% of what it would be using the joint filing status)
- Not eligible for the Earned Income Tax Credit
- Not eligible for adoption expense deductions
- Not eligible for the American Opportunity or Lifetime Learning Credit
- The standard deduction, child tax credit, retirement savings contributions credits, and personal exemptions are reduced by 50%
- Capital losses are limited to a deduction of $1,500 (opposed to $3,000 joint)
- If one spouse itemizes deductions, the other is required as well, regardless of if the standard deduction nets a larger benefit. Agreements must be made as to which spouse gets which deduction, further complicating the return.
While it seems this tax status may not work in anyone’s favor, there are a few benefits to certain taxpayers in specific situations. For example, those on an income-based student loan repayment plan may opt to file separately, as their separated adjusted gross income can lower monthly payments since they won’t be based on the entire income of the couple. Also, due to IRS limitations on itemized deductions for joint taxpayers whose income exceeds $309,900, high earners may find a lower tax bill overall by filing separately. In some cases, filing separately may allow more medical expenses to be deducted.
Note: Community property states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin – consider the earnings of couples to belong to both spouses, which negates any benefits from this status.
Any taxpayer who isn’t married and doesn’t qualify for any of the other filing statuses should file as single. According to the IRS, a couple who is legally divorced by the end of the tax year, even if the divorce was finalized on December 31st, is considered unmarried for the entire tax year and therefore should file single. Annulled marriages also fall under this category, regardless of if the couple filed jointly in the previous tax years.
It’s important to note that the IRS is aware of taxpayers getting divorced specifically to file their return using the single status. If a taxpayer remarries their ex in the next tax year, the IRS may require you to file using one of the married statuses.
Filing single may present a lower tax bill, since the tax bracket for single people is determined by income levels that are less than those for married filing jointly. Known as “the marriage penalty,” couples often end up in higher tax brackets quicker than those who are single.
Example: A taxpayer and his girlfriend file single in 2016 and each have incomes of $190,000. This puts them each in the 28% bracket. The same taxpayer married his girlfriend and opts to file jointly. They each still make $190,000, however they are no longer in the 28% bracket. Because the income is combined, the couple is bounced to the 33% tax bracket.