What’s your filing status?

Posted On: October 22, 2019  0 Comments

Do you know your filing status? Your status can change from year to year, and often you do have options. Which one you choose can have a huge impact on your final tax liability, changing your standard deduction amount and your eligibility for certain credits and other deductions. If you’ve had a major life event this year or haven’t reviewed them in a while, now is the time.

In general, the two main factors that determine your filing status are whether you are married and if you have dependents.

Marriage

Your legal marital status on December 31st is what the IRS considers you were for the entire tax year. Marriages, annulments, and divorce decrees are governed by state laws, and any legal marriage is recognized by the IRS. It does make a distinction for states that also offer domestic partnerships and civil unions and does not recognize those as the same as marriages.

Dependents

Whether or not you are supporting anyone besides yourself and your spouse changes things as well. The IRS makes a distinction between a qualifying child and a qualifying relative (who doesn’t necessarily have to be related to you). Depending on the relationship between you, they don’t necessarily have to live under your roof to be your dependent either. Other factors at play include the dependent’s own income, if any, their age, and their filing status.

Single

This is the catchall status for taxpayers who are unmarried or divorced, without providing the primary financial support for any dependents. If you qualify for any other filing status it is likely your tax liability will be less with the other.

For taxpayers who:

  • are unmarried or divorced as governed by state laws on the last day of the year
  • are not eligible to file as head of household or qualifying widow(er)

Head of Household

This filing status is for taxpayers who are unmarried but keep up a home for a qualifying person. It is generally more advantageous than filing Single, as it has a lower tax rate and a higher standard deduction.

For taxpayers who:

  • the IRS considers unmarried for the tax year

    For tax purposes, one can be legally married and still be “considered unmarried” and file as head of household if they meet additional conditions: the taxpayer must file a separate return from their spouse and their spouse must not have lived in the home during the last six months of the year. Their qualifying person must be their child or stepchild.

  • pay more than half the cost of keeping up a home for the tax year from their own earnings or capital (rent, groceries, property taxes, utilities, etc.)
  • can claim at least one qualifying child or relative, who lived in the home with them at least six months of the year, that did not pay more than half of their own living expenses. When the qualifying person is the taxpayer’s parent they do not need to live in the same household.

Married filing jointly

For most couples, married filing jointly is going generate the lowest tax liability and allow you to take advantage of the greatest amount of credits and deductions available to you. There are occasions where this is not the case, so ask your tax preparer about your options.

For taxpayers who:

  • are legally married and living together
  • are married and living apart but not legally separated
  • are living together in a common law marriage recognized by the state of residence or state where marriage began
  • are separated but without a finalized divorce decree
  • were widowed during the tax year and have not remarried

Married filing separately

You will generally pay more tax using this filing status, as the tax rate is usually higher than on a joint return, and many important credits and deductions are either eliminated or cut in half. But this filing status does have its uses. There may be legitimate reasons for needing to keep your finances separate from your spouse’s, or if there are previous debts or there is concern about shady dealings, you may want to separate your tax liability.

For taxpayers who:

  • the IRS considers married
  • are not eligible to file as Head of Household
  • benefit financially from separating their tax liability
  • need to protect themselves from their spouse’s tax liability

Qualifying widow(er)

This filing status grants surviving spouses with children still at home an extra two years of the married filing jointly tax benefits.

For taxpayers who:

  • were entitled to file a joint return with their spouse the year they passed away, whether they did so or not
  • are filing for one of the next two tax years after the tax year in which they lost their spouse
  • have not remarried
  • have a qualifying child or stepchild whom they can claim as a dependent, who has lived in the home all year
  • has paid more than half the cost of keeping up the home for the year

Still unsure about your status? Try the IRS’ Interactive Tax Assistant or talk to your Bacon & Gendreau professional.

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