Taxpayers generally don’t have much of a choice when it comes to whether they file as head of household or they file a joint married return. The rules for filing as head of household are challenging and can be difficult to meet – and with good reason. This is an advantageous filing status.
The Effect on Tax Brackets
As of 2018, head of household taxpayers move into the 22-percent tax bracket when their incomes exceed $51,800. Married taxpayers who file jointly don’t hit this tax bracket until their earnings reach $77,401. So married taxpayers have the advantage, right? Not necessarily.
Remember, there are two of them. Assuming that both spouses earn roughly an equal amount, they'll move into the 22-percent tax bracket at incomes of about $38,700 each, the same as a single filer. That’s $13,100 less than a head of household filer can earn.
Of course, if only one spouse works or if one earns a negligible income, that changes the picture considerably. Now the high-income spouse can earn up to $25,600 more than a head of household filer before he’s taxed at the 22 percent rate – the difference between $77,400 and $51,800.
Everything evens out beginning with the 24-percent tax bracket. All taxpayers inch up into higher tax brackets at the same levels of income at this point. Again, the major difference is that two individuals can contribute income when they're filing a joint married return. The married filing jointly limits are double that of the other filing statuses, but it works out to the same amount per person.
The Effect on the Standard Deduction
Those who are married and who file jointly are entitled to a $24,000 standard deduction in 2018 – $12,000 for each spouse. Single filers are entitled to claim the same – $12,000. But head of household filers can claim a standard deduction of $18,000, 1.5 times the $12,000 “per person” deduction.
The Effect on Credits and Deductions
Some tax credits and deductions have income limits. If you earn too much, you can't claim them or they at least phase out, reducing incrementally as you make more money. These limits are structured much like the standard deduction. Head of household filers can earn more than single filers, and married taxpayers who file jointly can more or less double the amounts that single filers are entitled to claim.
Your Marital Status
Most taxpayers don’t have a choice between filing as head of household or filing a joint married return because of the “considered unmarried” rule for qualifying as head of household. A head of household filer cannot be considered married so this filing status is the polar opposite of married filing jointly.
If you do happen to have a spouse, she cannot have lived with you after June 30 – the last six months of the tax year. “Temporary” absences from your home don’t count as living apart. Of course, you’re also considered unmarried if you were never married in the first place, if you have a decree of divorce, or if you’re legally separated from your spouse by court order. Otherwise, the IRS says you’re married if you lived together after June 30 so you don’t qualify as head of household.
Your Dependents – or the Lack of Them
The IRS doesn’t care whether you’re supporting any dependents if you want to file a joint married return, but you must have at least one qualifying dependent if you want to file as head of household.
This can be a child or certain adult relatives. Your child must have lived with you for more than half the year, although some qualifying adults, like your parents, don’t have to live with you if you’re financially supporting them in another residence such as a nursing home.
Income and Expense Factors
You must also meet certain financial requirements to file as head of household. You must pay more than half the costs of maintaining your household for the year. This includes rent or mortgage, property taxes, utilities and groceries, but not things like clothing, health insurance, medical bills, or car payments. If you’re claiming your parent as your dependent and he doesn’t live with you, the IRS says you must pay more than half the cost of his home.
The IRS doesn’t care which spouse pays for these things if you're married and filing jointly, or even if a third party does. Maybe you just got married and you’re living with your parents. Mom and Dad foot the household bills. That’s alright with the IRS as long as you don’t try to claim head of household status.
You don’t need anyone’s agreement or permission to file as head of household if you meet the rules to qualify, but you can’t file a joint married return without your spouse’s cooperation. She must sign the joint return with you and this makes each of you “jointly and severally liable” – equally responsible for its accuracy and any tax that is due.
If your spouse earned all the money and owes $10,000 in taxes, the IRS can demand payment from you if she doesn’t pay up. Likewise, if there are errors or omissions on your joint return, the IRS can pursue both of you for payment of any interest or penalties.
Unfortunately, if you’re considered married according to the rules, your only other choice for a filing status might be married filing separately. This is considered a particularly disadvantageous status. You’ll lose out on a lot of tax benefits if you file this way, so talk with a tax professional to be absolutely sure of your filing status.
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