What Does Filing as Head of Household Mean for Your Taxes?

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What Does Filing as Head of Household Mean for Your Taxes?

There is no tax filing position that causes greater confusion among taxpayers than “head of household.” What comes to mind when you hear the term? Who is the breadwinner? What is the primary source of family income? It’s not that straightforward for the Internal Revenue Service (IRS). To be eligible for head of household, you must pay for more than half of the household costs, be single, and live with a dependant whom you support for more than half of the year.

Key Takeaways

  • The identification of the head of household may assist in maximizing tax savings with the Internal Revenue Service (IRS).
  • There are many essential qualifications for filing as head of household, including being single, paying more than half of the household’s expenses, and living with a qualified family member for whom you pay more than half of the support.
  • Married taxpayers cannot claim head-of-household status; you must be unmarried or in the process of separating.
  • The standard deduction for heads of household is $18,800 in 2021 ($19,4000 in 2022), compared to $12,550 in 2021 ($12,950) for single filers.

Filing Your Taxes As Head of Household

The Guidelines for Filing as Head of Household

While this status might maximize your tax savings, you must ensure that you completely comply with IRS requirements in order to prevent an IRS investigation or audit. For starters, you cannot marry. Here’s an explanation of what filing as head of household implies for your taxes and who is qualified to do so.

  The 20/10 Rule of Thumb

As previously stated, in order to file as head of household, you must satisfy the following requirements:

  • Be unmarried
  • Pay for more than half of your household’s expenses.
  • You must live with other qualified family members for more than half of the year. A dependent kid, grandchild, brother, sister, grandfather, or anybody else you may claim as an exemption are all instances of qualified family members.

If you do not fulfill all of these standards, you are not qualified to file as the head of a household.

Stipulations for Married Taxpayers

Head-of-household position is not available to married taxpayers. You must be single or in the process of separating.

According to the IRS, if you are single, formally separated by divorce, or have lived apart from your spouse for six months or more during the calendar year, you are deemed unmarried.

A Note on Dependents

You must give at least 50% of the care received by a dependant, such as a child, parent, brother, sister, step-parent, step-sibling, foster kid, half-related, or any other relative for whom you may claim an exemption, in order to file as head of household.

It is wise to have supporting documentation to prove your claim, should the IRS inquire for further information.

Significant Financial Benefits for Heads of Household

If you qualify for head-of-household filing status, there are significant financial benefits in store for you. Not only will you receive a much more favorable tax rate than you would if you were to file as a single taxpayer, but taxpayers who file as head of household can claim a much higher standard deduction when filing their taxes.

  Ad Valorem Tax: Definition and How It's Determined

The standard deduction for married couples filing jointly for tax year 2021 is $25,100 ($25,900 for 2021). For single taxpayers and married individuals filing separately, the standard deduction is $12,550 ($12,950 for 2022). For heads of household, the standard deduction is $18,800 ($19,400 for 2022).

The Bottom Line

Prior to filing as head of household, be sure to review the IRS guidelines carefully to avoid an audit or hard inquiry in the future.

While you may consider yourself as the head of your household, your definition and the IRS’s definition may vary significantly. Most questions regarding the head of household filing status can be found online at irs.gov, or you can call the Internal Revenue Service at 1-800-829-1040.

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