Do You Know Your Taxpayer Filing Status?

Most of us are ready for 2020 to end. From a tax perspective, however, the end of the year means thinking about the filing status you’ll use when filing your tax return for the year. Partly, it depends on whether you’re married on December 31, 2020.

Five different statuses

When you file your federal tax return, you do so with one of five filing statuses.

  • Single: generally used if you’re unmarried, divorced or legally separated.
  • Married filing jointly: for married couples to file a tax return together. If your spouse passes away, you can usually still file a joint return for that year.
  • Married filing separately: for married couples who choose to file separate returns. In some cases, doing so may result in less tax owed.
  • Head of household: for certain unmarried taxpayers who qualify to use it and potentially pay less tax.
  • Qualifying widow(er) with a dependent child: can be used by people who have had their spouse die during one of the previous two years and have a dependent child, though there are other conditions that apply.

Head of household

Head of household status is often misunderstood and in some cases can be more favorable than filing as a single taxpayer. To qualify, you must “maintain a household” that, for more than half the year, is the principal home of a “qualifying child” or other relative that you can claim as a dependent.

A “qualifying child” is defined as someone under the age of 19 (or a student under the age of 24) who lives in your home for more than half the year and is your child, stepchild, foster child, sibling, or stepsibling, or a descendant of any of these. To qualify, the child cannot provide over half of his or her own support for the year. 

Different rules may apply if a child’s parents are divorced. Also, a child isn’t a “qualifying child” if he or she is married and files jointly or isn’t a U.S. citizen or resident.

For head of household filing status, you’re considered to maintain a household if you live in it for the tax year and pay more than half the cost of running it. This includes property taxes, mortgage interest, rent, utilities, property insurance, repairs, upkeep and food consumed in the home. Medical care, clothing, education, life insurance and transportation aren’t included.

Under a special rule, you can qualify as head of household if you maintain a home for a parent even if you don’t live with the parent. To qualify, you must be able to claim the parent as your dependent.

Not always clear which to choose

Filing status may seem obvious, but there can be situations in which it warrants careful consideration. If you have questions about yours, contact us and we can help you determine which status is most beneficial for you.

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