On the surface, it may seem like the easiest part of your income tax form to fill out, aside from your name and address. At the top of the 1040 tax form, there are instructions that read: Filing status. Check only one box.
The choices are:
— Married filing jointly.
— Married filing separately.
— Head of household.
— Qualifying widow(er).
Sounds easy, right? But the more you think about it, you might find yourself a bit puzzled. After all, if you’re married, you can file jointly or separately. Which is better? And who can file as “head of household,” a filing status that may sound like a throwback to the 1950s?
For these and more questions about choosing your tax filing status, read on.
When Should a Tax Filing Status Be Single?
This one is easy. If you are single, have no children and no one depends on you financially, like an aging parent who lives with you, you should file as single.
I’m Married. Is It Smarter to File Jointly or Separately?
Usually it’s smarter to file jointly, according to Jeffrey Wood, a certified public accountant and partner at Lift Financial, a wealth management firm in South Jordan, Utah.
“There are certain tax deductions that may phase out or be lost when a couple files separately,” Wood says. “Some common and often-used deductions such as the earned income credit, the American opportunity credit, the student loan interest deduction and the lifetime learning credit are not available to married individuals who file separately. In addition, tax rates are typically higher for individuals filing as single or married filing separately than for those who file jointly.”
Got that? You’ll probably save money if you are married and file jointly.
Why Would a Married Taxpayer File Separately?
Occasionally it is smarter to file separately, Wood says.
“If one party in the married relationship had preexisting debts that could be garnished by the IRS, the other spouse may want to file separately to protect their expected tax return,” he says.
You and your spouse may also have such a large difference in incomes where the higher-earning spouse’s income will be taxed at a much higher rate than the lower-earning spouse’s income, Wood says.
“In this circumstance, the lower-earning spouse may want to file separately to preserve their lower tax bracket and perhaps their expected refund,” Wood says.
Another good reason for a married couple to file their taxes separately: “One spouse may be a business owner and is choosing to push some risky tax positions with which the other spouse may not feel comfortable,” Wood says.”The IRS considers both spouses on a joint return to be equally liable for the tax positions taken and both spouses will be on the hook for any taxes and penalties for that given tax year, even if they later separate or divorce.”
And, finally, if you’re separating or thinking of separating, Wood says you might consider filing separately for the tax year if it makes financial sense for both or one of you.
What About Head of Household Filing Status?
“Head of household is one of the most misunderstood filing statuses,” says Mark Puzdrak, owner of Puzdrak CPA, an accounting firm in Austin, Texas.
Someone who files as head of household is generally unmarried with dependents. Puzdrak says that there are three qualifications you must meet to be classified as head of household.
1. You were not married on the last day of the year.
2. You paid more than half the cost of keeping up a home for the year.
3. A qualifying person lived with you in that home for more than half the year, except for temporary absences.
Who is a qualifying person? Usually, it will be a minor: your child, stepchild or maybe a foster child. In other words, if you’re a parent who never married or is divorced, and your kids live with you most of the time, you’re probably going to file as head of household.
That said, you don’t have to be a single parent to file for head of household. You could also be taking care of a brother, sister, grandparent, mother or father or some other relative and claiming them as a dependent.
When Should You File as Qualifying Widow or Widower?
Believe it or not, this isn’t as straightforward as it sounds either. If you’ve been a widow or widower since 2007, for example, you wouldn’t file as a widow or widower. There’s a time limit on how long you can file as one.
“If your spouse died within the year, you can still file jointly or separately as a married person for that year. After that, if you haven’t remarried and have a dependent child, you can file as a qualifying widow or widower for up to two years,” says Joshua Zimmelman, managing partner of Westwood Tax & Consulting, a virtual tax firm.
There’s a reason for the time limit. Filing as a widow or widower allows you to get the same standard deduction and tax rates as married couples, Zimmelman says.
“After two years,” he says, “your status changes to ‘head of household’ or ‘single’ — unless you have remarried.”
What Else Should I Know About Choosing a Filing Status?
Here are some helpful rules to keep in mind:
Dates matter. You’re filing for your taxes for last year and not this year, and the date to really consider is Dec. 31. Zimmelman puts it this way: “If you are married, you must file as married, even if you were single for 364 days of the year. If you’re married on Dec. 31, you are married on your tax return.”
Choose your filing status carefully. After all, you may be stuck with your filing status for the specific tax year you are filing in. If you’re married and file jointly, and then a few months after you send it to the IRS you wanted to make changes to your taxes and file separately, Zimmelman says you won’t be able to change it.
“On the other hand, if you file separate returns and then later realize you should have filed jointly, you can amend your returns to file jointly within three years,” Zimmelman says.
Understand the meaning of “dependent.” It’s important, says Zimmelman. For starters, if you’re going to claim someone as a dependent, you need to understand how the IRS defines dependent. In a nutshell, it’s a qualifying child or a qualifying relative of the taxpayer. Your spouse is not a dependent. To claim adult children, they must be under age 24 at the end of the tax year — and unmarried.
[See: 15 Tax Questions — Answered.]
Or perhaps you’re a dependent. Maybe you’re a 19-year-old filling out your first tax form, or you’re a 91-year-old living with your son or daughter. You’ll need to keep that in mind when filing.
“While not technically a filing status, whether or not someone else claims you as a dependent affects your own filing status,” Zimmelman says. “To legally be claimed as a dependent by a parent or other qualifying relative, you must be unmarried. If you fit all the necessary criteria of a dependent, you may still need to file your own tax return — based on how much you earned during the year — but you cannot take the standard deduction.”
So hopefully that helps. That wasn’t so bad, was it? Now all you have to do is fill out your name and address, answer a few dozen questions, and maybe complete some tax schedules, and you’ll be … done.
More from U.S. News