For some people, like those who are single and don't have any dependents, choosing the correct filing status on their taxes may be the simplest section of the tax form to fill out. If you’re married, you can generally choose between filing jointly and separately. However, there are certain situations when married people have a third option and can file as head of household.
Taxpayers who are legally married on the last day of the tax year typically file a joint return with their spouse or file as married filing separately. When filing jointly, your combined income is subject to lower tax rates than when filing separately, but you’re liable for 100 percent of any tax that is owed, though some exceptions to joint liability do exist. In contrast, filing separately eliminates your responsibility for your spouse’s tax debt, but the IRS will impose higher tax rates, won’t allow you to report a number of tax credits, and places significant limitations on your standard deduction and your ability to itemize.
In some cases, the IRS allows legally married taxpayers to file separately and use the head of household filing status if they’re “considered unmarried.” Whether you’re waiting for your divorce to be finalized, legally separated or simply decide to live apart without any court intervention, the IRS will consider you unmarried if during the last six months of the tax year you and your legal spouse don’t share the same household, you pay more than half the costs associated with maintaining your home and you have a child, stepchild or foster child living with you for more than half the tax year. Though some exceptions exist in cases where the noncustodial parent takes the exemption, you generally must be eligible to claim at least one child as a dependent to qualify.
Dependent Exemption Rules
Under the qualifying child rules, you can only claim dependents who aren’t older than 18 or older than 23 if a full-time student during the tax year. However, you can claim a child of any age if they are permanently and totally disabled. In addition, any child you claim as a dependent cannot provide the funds for more than half of their own support, and you should count any housing you provide as required under the head of household rules as support they aren’t providing for themselves. Lastly, your dependent child cannot file a joint return with their spouse unless the only reason for doing so is to obtain a refund of taxes actually paid. If any of these requirements cannot be satisfied, but you provide more than half of your child’s financial support and their gross income is less than the exemption amount, they can qualify as your dependent under the qualifying relative rules.
Head of Household Benefits
If your goal is to avoid filing a joint return, filing as head of household instead of married filing separately can potentially save you a significant amount in tax. Your tax savings are achieved through a higher standard deduction and tax brackets that impose lower tax rates on your income than the married filing separately brackets do.