Your tax rate is affected in many circumstances by your filing status. Common IRS filing statuses include single, married filing jointly and married filing separately. Another filing status known as head of household tax status applies in some circumstances to people who are unmarried or separated and supporting dependents, such as single parents and people looking after elderly relatives.
TL;DR (Too Long; Didn't Read)
Filing as head of household often saves taxes compared to filing as married filing separately or single. The rules for who is allowed to file this way can be complex, but using head of household IRS status can save you money if you're eligible.
Head of Household vs. Married
According to the IRS, you can claim head of household tax status if you were unmarried or considered unmarried on the last day of the tax year, paid more than half of keeping up a home during that year and a qualifying person, usually a dependent, lived with you for more than half the year. Exceptions apply if you're taking care of elderly relatives who don't live with you.
There are exceptions and nuances to all these rules, but if you qualify, you can save money over filing as married filing separately or single. Generally, your tax rate will be lower, and you will qualify for a higher standard deduction than a taxpayer who is single or married filing separately.
Some states recognize head of household tax status and some have similar statuses of their own. For example, New York offers a head of household tax status, while Mississippi has a similar head of family status for its taxpayers. You may wish to consider state tax ramifications as well as federal ones, depending on your state laws.
Who Is Considered Unmarried?
According to IRS rules, you must be legally unwed or considered unmarried on the last day of the tax year to claim head of household status. You can be considered unmarried and still be legally married according to your state's law if you file separate tax returns, you paid more than half the cost of keeping up your home and your spouse didn't live in your home for the last six months of the year.
Your home must also be the main home of your child, stepchild or foster child for more than half the year. If the child was born or died during the year, consider only the days on which he was alive. For all of the head of household residency rules, there are special cases for temporary absences, like for military service, educational purposes and business trips.
Keeping Up a Home
To be head of household, you must pay more than half the cost of keeping up a home. This includes expenses like property tax, rent and mortgage interest directly related to keeping a roof over your head.
It also includes utility costs, repairs and maintenance on the home, property insurance and the cost of food eaten in the home. You can't include other expenses for people in the home, like clothing, education, transportation and medical costs. Vacation-related costs also don't count. You can't count the value of the services you or anyone else contributes to the household. IRS Publication 501 includes a worksheet that might help you figure out what you and other people contribute to the cost of keeping up a home.
Who Is a Qualifying Person?
You generally must live with a qualifying person to claim head of household tax status. Publication 501 includes a table, essentially a flowchart, for figuring out who qualifies. Generally, your single child or grandchild or your married child or grandchild whom you could count as a dependent for tax purposes qualifies. A married child or grandchild you can't claim as a dependent generally does not count.
If you have a parent you can claim as a dependent, your parent can also count as a qualifying person even if she does not live with you. You must pay more than half the cost of keeping up your parent's home. That can mean the cost of keeping her in a rest home or home for the elderly. Other relatives, such as grandparents, and other direct ancestors, such as aunts, uncles, nieces and nephews, can also count as qualifying people under IRS rules. Generally, they must live with you at least half the year and be able to be claimed as your dependent.
Since the rules on qualifying people are quite complex, it can be worth carefully studying the IRS documents or consulting a tax professional if you're not sure if someone you live with and support legally qualifies.
Temporary Absences From Home
If you're considering whether you lived with someone for more than half the year, you shouldn't count times when you or the person were temporarily absent from home. These include times when someone was out of the home on a business trip, receiving medical care, receiving an education or simply taking a vacation. Children who are out of the home because they're in juvenile detention are also considered temporarily absent from home. It has to be reasonable to assume someone will return to the home after the absence for it to qualify as temporary under IRS rules.
There are special cases for using head of household filing status if your child has been kidnapped and would be a qualifying person if he lived at home. You can file with head of household status while your child is kidnapped during the year he was kidnapped and the year he returns if you meet these requirements and could otherwise file as head of household.
The child must be known or presumed by law enforcement officials to be kidnapped by someone who is not related to you or the child. In the year of the kidnapping, the child must have lived with you for more than half the year prior to the kidnapping. In the year he returned from being kidnapped, if applicable, the child must live with you half of the rest of the year after returning from the kidnapping. You can continue filing as head of household until the year the child turns 18 or the child is determined to be deceased.
Qualifying Widower or Widow Status
There are special tax filing options available to you if your spouse passes away. The year your spouse dies, you can continue to file as married filing jointly if you otherwise could do so. This is usually more advantageous than filing as single or head of household.
For the next two years, you can file as a qualifying widower or widow if you have a dependent child. The two statuses are the same except for the name based on your gender, and they entitle you to claim tax rates and deductions as if you were a married couple filing jointly.
The child generally must have lived with you throughout the year except for temporary absences, and you must pay the majority of the cost of keeping up your collective home. If you remarry, you lose the option to claim this status, although you naturally can claim married filing jointly or married filing separately status as appropriate. Generally, this status will get you better tax treatment than filing as head of household since you can claim the married filing jointly rates and standard deductions.
- Investopedia: Head Of Household
- IRS: Publication 504 (2017), Divorced or Separated Individuals
- IRS: Publication 501 (2017), Exemptions, Standard Deduction, and Filing Information
- New York State Department of Taxation and Finance: Household Credit
- Mississippi Department of Revenue: Tax Rates, Exemptions, & Deductions
- efile.com: Qualifying Widow or Qualifying Widower Tax Filing Status
Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.