When filing your income tax return, your tax filing status can have a significant effect on the amount of tax you owe. Most taxpayers fall under one of four tax filing statuses: single, head of household, married filing jointly or married filing separately. The head of household status is available to certain single and separated taxpayers and can potentially result in thousands of dollars of tax savings.
Unlike other tax filing statuses, the head of household status has strict eligibility requirements. To qualify as head of household, you must pay at least half the cost of keeping up your home for the tax year and your home must be the main home of a child that you can claim as a dependent for at least half the year. You must also be unmarried or "considered unmarried" to qualify. You are considered unmarried if your spouse did not live with you during the last six months of the tax year, you do not file a joint return and you meet the other requirements to be considered a head of household.
The Internal Revenue Service grants a standard deduction that you can claim instead of claiming your itemized deductions. Itemized deductions include a variety of common expenses, such as property taxes, mortgage interest, certain work-related costs and donations to charity. The standard deduction is $8,700 for the 2012 tax year if you file as the head of a household. Filers using the single or married filing separately statuses have a standard deduction of $5,950. If you use your standard deduction, the head of household status lets you avoid taxes on an extra $2,750 of your income.
Filing as the head of household makes you subject to different tax brackets than other filers, which can potentially save thousands of dollars depending on your annual income. As the head of household, you can earn more income than single filers before reaching the top tax brackets. For example, a head of household filer pays a tax rate of 25 percent on income earned between $47,351 and $122,300 in 2012, while the 25 percent tax bracket for single filers starts at $35,351 in annual income and ends at $85,650.
Married Filing Separately
Head of household status offers a few extra advantages over the married filing separately status. You can't claim your standard deduction as a separate filer if your spouse itemizes deductions, but if you file as head of household, you can claim the standard deduction regardless of your spouse's deduction claims. Head of household status can also allow you to claim certain tax credits that aren't available if you file as married filing separately, such as a credit for dependent care expenses.