Filing Status

Detailed Explanation

Filing status is a fundamental component of an individual’s income tax return, influencing how much tax they owe and which tax credits and deductions they can claim. The Internal Revenue Service (IRS) in the United States recognizes five primary filing statuses:

1. Single: For taxpayers who are unmarried, divorced, or legally separated as of the last day of the tax year.

2. Married Filing Jointly: For married couples who choose to combine their income and deductions on a single tax return.

3. Married Filing Separately: For married individuals who choose to file separate tax returns, each reporting their own income and deductions.

4. Head of Household: For unmarried taxpayers who pay more than half the cost of keeping up a home for themselves and a qualifying person, such as a child or dependent relative.

5. Qualifying Widow(er) with Dependent Child: For taxpayers whose spouse has died within the past two years and who have a dependent child, allowing them to use the same tax rates as Married Filing Jointly.

Selecting the correct filing status is crucial because it affects the standard deduction amount, tax brackets, and eligibility for various tax credits and deductions. For instance, the standard deduction for Head of Household is higher than for Single filers, providing a tax benefit. Additionally, some credits, like the Earned Income Credit, have different income limits based on filing status. Taxpayers should carefully evaluate their circumstances each year to determine the most advantageous filing status, especially if their marital or family situation has changed.

Example

Let’s consider Alex, who is unmarried and supports his elderly mother. She lives with him, and he provides more than half of her financial support and the household expenses. Alex qualifies for the Head of Household filing status because he is unmarried, and his mother is a qualifying dependent relative. By choosing Head of Household instead of Single, Alex benefits from a higher standard deduction and more favorable tax brackets, reducing his taxable income and overall tax liability.

Key Articles Related To Filing Status 

• Earned Income Tax Credit: What It Is And How To Qualify
• 10 Ways To Save On Taxes Before The End Of The Year

Related Terms

Adjusted Gross Income (AGI): An individual’s total gross income minus specific adjustments, serving as the basis for calculating taxable income.

Dependent: A person, such as a child or relative, who relies on the taxpayer for financial support and meets IRS criteria for dependency.

Earned Income Credit (EIC): A refundable tax credit for low- to moderate-income working individuals and families, particularly those with children.

Exemption: An amount that was previously allowed to reduce taxable income for taxpayers and dependents (personal exemptions are currently suspended under the Tax Cuts and Jobs Act until 2025).

Head of Household: A filing status for unmarried taxpayers who pay more than half the cost of maintaining a home for themselves and a qualifying person.

Marital Status: The legal standing of an individual regarding marriage, affecting eligibility for certain filing statuses.

Qualifying Child: A dependent who meets specific IRS criteria regarding relationship, age, residency, and support.

Standard Deduction: A fixed dollar amount that reduces the income on which you’re taxed, varying based on filing status.

Tax Bracket: A range of income amounts taxed at particular rates, which differ based on filing status.

Tax Credit: A dollar-for-dollar reduction of the actual tax owed, which can be refundable or non-refundable.

FAQs

How do I determine my correct filing status?

Your filing status is based on your marital status and family situation on the last day of the tax year. Review IRS guidelines or consult a tax professional to identify the status that fits your circumstances.

Can I choose between different filing statuses?

If you qualify for more than one filing status, you can choose the one that results in the lowest tax liability. For example, a single parent might qualify for both Single and Head of Household but would benefit more from Head of Household.

What are the benefits of filing as Married Filing Jointly versus Married Filing Separately?

Filing jointly often results in a lower tax liability due to higher standard deductions and more favorable tax brackets. However, filing separately might be beneficial in certain situations, such as when one spouse has significant medical expenses.

Can unmarried couples file jointly?

No, only legally married couples can choose the Married Filing Jointly or Married Filing Separately statuses. Unmarried couples must file as Single or Head of Household if they qualify.

How does my filing status affect my standard deduction?

The amount of the standard deduction varies by filing status. For example, for tax year 2021, the standard deduction is $12,550 for Single filers, $18,800 for Head of Household, and $25,100 for Married Filing Jointly.

If my spouse died this year, what is my filing status?

If your spouse died during the tax year, you can usually file as Married Filing Jointly for that year. For the following two years, if you have a dependent child, you may qualify as a Qualifying Widow(er) with Dependent Child.

Can I file as Head of Household if I’m married?

Generally, no. However, if you didn’t live with your spouse during the last six months of the year and meet other criteria, you might qualify as Head of Household. This is sometimes referred to as being “considered unmarried” for tax purposes.

What happens if I select the wrong filing status on my tax return?

Choosing the wrong filing status can affect your tax liability and may result in penalties or delays in processing your return. If you realize you’ve made an error, you should file an amended return (Form 1040-X) to correct it.

Are there filing statuses for people who support dependents but are not their parents?

Yes, if you support a qualifying relative and meet other IRS requirements, you may be eligible to file as Head of Household, which offers tax advantages over filing as Single.

How does my filing status affect eligibility for tax credits and deductions?

Many tax credits and deductions have income limits or other criteria that vary based on filing status. For example, the Earned Income Credit and Child Tax Credit amounts can differ depending on whether you file as Single, Head of Household, or Married Filing Jointly.