When completing your annual tax return, your filing status is one of the first things you must determine. Single, married filing jointly, married filing separately, qualifying widow or head of household are among the filing statuses you choose from. Although you sometimes have a bit of say in the matter, your life situation and circumstances generally dictate your filing status. If you're planning to file as head of household this year, it is wise to know what it entails, including its requirements and its benefits.
Are You Head of Your Household?
To claim the head of household status on your income tax return, you must be a breadwinner in your home. That means you covered at least half of the cost of the bills and upkeep in your home throughout the year. Also, you have to be unmarried, or at least considered unmarried from the Internal Revenue Service's standpoint. For instance, if you became legally separated during the tax year, you can qualify as unmarried. Finally, you must have a qualifying person living in your home that you support. You must claim a dependent person to file head of household -- you cannot file using the head of household status if you do not claim a dependent. This person may be a qualifying child or a qualifying relative.
Who Is a Qualifying Child?
To determine whether a child is a qualifying child, the IRS uses five tests -- relationship, age, residency, support and joint return. If the child is your son or daughter, stepchild, foster child, or a descendant of yours such as a grandchild that you claim as an exemption for payroll purposes, this person would qualify as your qualifying child. Your qualifying child must be younger than you and under the age of 19. However, if your qualifying child is a student, the age limit goes up to 24, and if she is permanently disabled, her age does not matter. Your qualifying child must live with you for more than half of the year, unless she is a student or there is another valid reason, such as an illness that requires relocation. You must have provided more than half of the monetary support for your qualifying child during the tax year. Finally, your qualifying child generally may not file a joint return with anyone else. The exception is if she is filing a return with her spouse and seeking a refund for income tax withheld or estimated taxes paid. A qualifying child may not file a joint return to receive tax credits.
Who Is a Qualifying Relative?
The IRS requires that qualifying relatives meet four tests -- the not-a-qualifying-child test, the relationship test, the support test and the gross income test. A child is not a qualifying relative if she fits all the criteria for a qualifying child. A qualifying relative may only be claimed on one tax return -- if your sister is your dependent, she cannot be your mother's dependent as well. The relationship test says that a qualifying relative must live with you all year as a member of your household or be related to you. For instance, your sister may fit the criteria for a qualifying relative without living with you all year, but your friend must live with you throughout the entire tax year to meet this requirement. Finally, you must have provided more than half of your qualifying relative's support during the year, and your qualifying relative may not have earned more than $3,900 during the year.
Why File as Head of Household?
Filing as head of household results in a lower federal tax rate. If you earned $50,000 during the 2013 tax year, your federal tax owed, prior to credits and deductions, would be $8,435 if you were to file single, but only $7,009 if you file as head of household. The same applies at other levels of income. If you file as head of household, you also may apply for earned income credit, a refundable credit that you cannot receive if you file single. As of 2013, earned income credit can increase a federal tax refund by up to $6,044. Additionally, filing as head of household results in a higher standard deduction. The 2013 standard deduction is $8,950 for head of household filers, versus only $6,100 for those who file single.
- Internal Revenue Service: Publication 501
- Internal Revenue Service: Filing Status
- Internal Revenue Service: EITC Income Limits, Maximum Credit Amounts and Tax Law Updates
- Internal Revenue Service: 2013 Tax Tables
- Women's Health USA 2012: Household Composition
- Internal Revenue Service: Personal Exemptions and Dependents
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