The Nits and Grits about the Filing Status

What is Filing Status?

Filing status is a classification used by the Internal Revenue Service (IRS) to determine the tax rate and tax liability of an individual taxpayer. There are five different filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child.

Let's take a first dive into each of the categories:

Single -

Single taxpayers are those who are unmarried or legally separated on the last day of the tax year. They must file as single if they do not qualify for any other filing status.

Married -

Married taxpayers have the option to file a joint return with their spouse or to file separate returns. Filing jointly typically results in a lower tax liability because the tax bracket thresholds are higher for married couples. However, if one spouse has a significant amount of debt or high income, it may be more beneficial for them to file separately.

Head of Household -

Head of household is a filing status for taxpayers who are unmarried and pay for more than half of the cost of maintaining a home for themselves and a qualifying person, such as a child or dependent. This filing status typically results in a lower tax liability than filing as single.

Qualifying Widow(er) -

A qualifying widow(er) with dependent child is a filing status for a taxpayer whose spouse died in the previous two years and who is maintaining a home for a dependent child. This filing status allows the taxpayer to use the married filing jointly tax rates and bracket thresholds for two years after the death of their spouse.

Now, you have a brief on the categories, it's time to deep dive into each of them:

Single -

Single is a filing status for taxpayers who are unmarried or legally separated on the last day of the tax year. This means that they do not have a spouse, or they are legally separated according to state law. Taxpayers who are divorced on the last day of the tax year are considered single for the entire tax year.

Single taxpayers must file as single if they do not qualify for any other filing status.

They can claim their own personal exemptions and are subject to the lowest standard deduction as well as the highest tax rate brackets.

Single taxpayers are also subject to the Alternative Minimum Tax (AMT) at a lower threshold than married taxpayers.

Single taxpayers may also be eligible for certain tax credits and deductions, such as the Earned Income Tax Credit (EITC) for low-income earners, the Child Tax Credit for taxpayers with dependents, or the American Opportunity Tax Credit for post-secondary education expenses.

It's important to note that while single taxpayers may have the highest tax rates, they also have the highest income threshold for certain deductions and credits that may offset the higher rate.

Married Filing Jointly -

Married Filing Jointly (MFJ) is a filing status for married couples who choose to file a joint tax return. This means that both individuals' incomes, deductions, and credits are combined and reported on a single tax return.

Filing jointly generally results in a lower tax liability because the tax bracket thresholds are higher for married couples than for single individuals. Additionally, the standard deduction for married couples filing jointly is also higher than for single individuals.

When filing jointly, both spouses are responsible for any taxes owed or refunds due, regardless of who earned the income. This means that both individuals are held liable for any errors or underpayment of taxes on the joint return.

However, if one spouse has a significant amount of debt or high income, it may be more beneficial for them to file separately. This is known as Married Filing Separately (MFS) status. In this case, each spouse is responsible for their own tax liability.

It's important to note that some states require married taxpayers to file a joint return, even if they file separately on their federal return.

Married Filing Separately -

Married Filing Separately (MFS) is a filing status for married couples who choose to file separate tax returns. This means that each individual reports their own income, deductions, and credits on their own separate tax return.

Filing separately can be beneficial for couples where one spouse has a significant amount of debt or high income, as it can help to lower their overall tax liability. However, it is typically not as beneficial as filing jointly, as the tax bracket thresholds are generally lower for married couples filing separately, and the standard deduction is also lower.

When filing separately, each spouse is responsible for their own tax liability, which means that each individual is liable for any errors or underpayment of taxes on their separate return.

It's important to note that some states do not allow married taxpayers to file separately and require them to file jointly. Additionally, certain credits and deductions may not be available or may be limited for those who file separately.

Qualifying Widow(er) -

A Qualifying Widower with a Dependent Child is a filing status for a taxpayer whose spouse died in the previous two years and who is maintaining a home for a dependent child. This filing status allows the taxpayer to use the married filing jointly tax rates and bracket thresholds for two years after the death of their spouse.

To qualify for this filing status, the taxpayer must meet all of the following criteria:

1. The taxpayer's spouse died in the last two years and the taxpayer has not remarried.
2. The taxpayer paid for more than half the cost of maintaining a home for the tax year.
3. A dependent child lived in the home for more than half the year.

This status can provide tax benefits such as a higher standard deduction and more favorable tax rates compared to filing as a single or head of household. Additionally, the taxpayer may also be eligible for certain tax credits and deductions, such as the Earned Income Tax Credit (EITC) for low-income earners, the Child Tax Credit for taxpayers with dependents, or the American Opportunity Tax Credit for post-secondary education expenses.

Head of Household -

Head of Household (HOH) is a filing status for unmarried taxpayers who pay for more than half of the cost of maintaining a home for themselves and a qualifying person, such as a child or parent, who lived with them for more than half of the tax year.

This filing status provides certain tax benefits, such as a higher standard deduction and more favorable tax rates compared to those of single filers.

Additionally, the taxpayer may also be eligible for certain tax credits and deductions, such as the Earned Income Tax Credit (EITC) for low-income earners, the Child Tax Credit for taxpayers with dependents, or the American Opportunity Tax Credit for post-secondary education expenses.

To qualify for HOH filing status, the taxpayer must meet certain criteria:

1. The taxpayer must be unmarried or considered unmarried on the last day of the tax year.
2. The taxpayer must have paid for more than half the cost of maintaining a home for the tax year.
3. A qualifying person, such as a child or parent, must have lived with the taxpayer for more than half the year.

Conclusion -

In conclusion, the choice of filing status can have a significant impact on a taxpayer's tax liability and potential tax refunds or liabilities. The five main filing statuses are Single, Married Filing Jointly (MFJ), Married Filing Separately (MFS), Qualifying Widower, and Head of Household (HOH).

It's important to note that the choice of filing status can have a significant impact on a taxpayer's tax liability and potential tax refunds or liabilities. It's important to review all options and consult with a tax professional or use tax software to determine the best filing status for your individual situation. Additionally, taxpayers should also consider state taxes and laws as they may differ from federal regulations.