Explanation of the 5 Types of Filing Status for Taxes
For taxpayers who have more than one option as far as their filing status for taxes, the status you choose will be an important factor in calculating your tax liability. Your tax-filing status determines how much income tax you pay and the deductions to which you are entitled.
Though the majority of taxpayers can’t choose their tax status, married couples can choose whether to file their taxes jointly or separately. Expert accounting professionals can advise you on what is best for you and your family and take you through the process to ensure the best possible outcome.
1. Single
People who are unmarried or legally separated or divorced from their spouse on the last day of the tax year must select the Single filing status. Your Single status only changes if you get married legally; people with significant others, even if they share children, are still classed as Single as long as they remain unmarried. Divorcees, legally separated individuals, and widows and widowers also usually count as Single for tax purposes.
Please note: Choosing the wrong filing status is one of the most common tax mistakes; to avoid penalties and extra paperwork, be sure to check your status carefully before filing your tax return.
2. Married Filing Jointly
Married couples have two options: to file jointly or separately. To qualify for the Married Filing Jointly status, both parties must agree to file a joint tax return. Filing jointly involves reporting your combined income and deducting your combined allowable expenses.
Many of the married couples we see in our Jacksonville, Florida office and our other offices around the country find that they have a lower tax liability or receive a larger return when they choose to file their taxes jointly, making this an appealing way to file taxes. However, this approach to filing taxes tends to be advantageous when only one spouse has a large income; if both spouses work but their income is unequal, it may be better to file your taxes separately.
Pro tip: Tax planning specialists can help couples choose the best status for filing their taxes by analyzing their personal circumstances to get the most beneficial result for them and their families.
3. Married Filing Separately
Separate filing must be used when a married couple doesn't agree to file a joint tax return or if they prefer to keep their finances separate. Some married couples also choose to file separately as it is financially beneficial for each person to be responsible for their own taxes, for example, if one spouse has a relatively low income but has high medical expenses.
For some couples, filing separately means paying less tax than filing a joint tax return, making this a beneficial choice for that couple. Couples should note, however, that it’s a tax myth that both partners can claim the same dependent children; only one spouse can claim any dependent children shared by the couple.
The experts weigh in: According to the Baker Institute, Married Filing Separately can be better or worse for certain couples depending on their circumstances. Because there isn’t a one-size-fits-all rule, hiring a tax specialist to help you compare the options is a good idea.
4. Head of Household
A Head of Household is an individual who pays 50% or more of the expenses of a household and fulfills three conditions:
You were unmarried or considered unmarried on the last day of the tax year.
You contributed more than half of the cost of the upkeep of a home, such as property taxes and household expenses, during the year.
A qualifying person—a dependent child, grandchild, sibling, grandparent, or other qualifying person—lived with you in your home for more than half the year minus temporary absences such as going to school.
Household expenses can include rent or mortgage payments, utility bills, insurance, property taxes, groceries, repairs, and other household expenses. A Head of Household filing status allows you to benefit from a lower tax rate.
5. Qualifying Widow(er) with Dependent Child
The IRS offers some relief to ease the financial burden of losing a spouse in the immediate years after their death. Surviving spouses can file jointly with their deceased spouses for the tax year their spouse died and may then be eligible for a special status that the IRS offers to new widow(er)s.
To file under the Widow(er) with Dependent Child filing status, you must fulfill the following conditions:
Your spouse must have died in the last tax year or the previous one.
You can't have remarried.
You must maintain a home for one or more qualifying dependent children—a son, daughter, stepson, or stepdaughter through blood or adoption.
This status gives the surviving spouse a two-year window to transition from joint tax filing to a Single status for tax purposes.
What Are the Benefits of Widow(er) Status?
The qualifying widow(er) status offers two main benefits:
The standard deduction amount and tax brackets are the same as for married couples who file jointly.
The temporarily lowered tax burden can help with expenses such as funeral costs and eases the transition to a Single tax status.
In addition to these benefits, qualifying widow(er)s aged 65 or over or who are blind can claim an additional $1,400 standard deduction for 2022.
Consult a Tax Professional to See How Your Tax Filing Status Could Impact Your Tax Return
There are many potential benefits available for people who can choose their income tax filing status, making this an important financial decision. Deciding whether to file taxes jointly or separately can also be complicated in some cases, making it essential to seek expert advice.
If you prefer to have a tax professional file your return for you, choosing a reputable accounting agency can help you avoid costly penalties for choosing the wrong tax filing status. Best of all, the right tax professional will work to ensure that your family gets the most out of its return, giving you full peace of mind and potentially more money at the end of the day.
