What is My Tax Filing Status and Why Does It Matter?

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By Cristina Wiebelt-Smith, CPA, Associate Wealth Advisor

Many of us are familiar with the most common filing status categories – single and married filing jointly (MFJ). But did you know there are three additional categories? Married filing separately (MFS), Head of Household (HOH) and Qualifying Widow(er).

Filing status is important because it determines which tax brackets you can use and the amount of your standard deduction. If more than one status applies to you, choose the one that gives you the lowest tax. Using Head of Household or Qualifying Widow(er) can be especially beneficial for single parents who are supporting a household on one income. Be sure you understand which status you qualify for and know that certain events can cause a change in your status.

Life events that can trigger a change in status include but are not limited to:

  • Marriage
  • Birth of a child
  • Financially supporting a parent
  • Adoption
  • Legal separation
  • Divorce
  • Death of a spouse

Single

  • You are considered single if you are not married at the end of the tax year.
  • You are considered unmarried for the full year if on the last day of the year, you are either:
    • Legally divorced or legally separated under state law as of the last day of the tax year.
  • Your return is filed with only your income, your deductions, and credits.

Married Filing Jointly (MFJ)

  • You are married on the last day of the tax year (even if you didn’t live with your spouse).
  • Both spouses agree to file jointly.
  • Your spouse passes away during the year and you don’t remarry before the end of the year.
  • If one spouse is a nonresident alien or dual status alien, please check with a tax advisor.
  • All income, deductions and credits of both spouses are combined into one joint return.

 

Married Filing Separately (MFS)

  • You are married at the end of the tax year.
  • One or both spouses cannot agree to file a joint return.
  • The spouses have different tax years (extremely rare).
  • Each spouse files his or her own tax return and reports only his or her items of income, deductions, and credits.

Have your tax preparer compare your total federal and state tax for MFJ versus MFS before making a decision. Married filing separately is optional and typically not advantageous but there are some circumstances where it might make sense.

  • One spouse has low income and can qualify for credits if they file separately.
  • One spouse has low income but has major unreimbursed medical expenses.
  • One spouse wants to avoid joint and several liability for unreported income or overstated deductions attributable to the other spouse.

Head of Household (HOH)

  • This filing status is typically for a single parent who provides more than half of the support for a child.
  • You must be unmarried as of the last day of the year and provide more than half of the support for a qualifying dependent.
    • Unmarried can include several different scenarios:
      • Legally separated according to state law under a decree of divorce or separate maintenance. But if, at the end of the year, your divorce wasn’t final, you are considered married for the entire year.
      • You are married but lived apart from your spouse for the last 6 months of the year. There are additional rules in this circumstance – please consult a tax advisor.
      • You are married to a nonresident alien at any time during the year – please consult a tax advisor.
    • A qualifying dependent can be a child or a parent.
      • A child includes biological, adopted, stepchild and foster children. There are additional rules for custody agreements so consult a tax advisor for this situation.
      • Your parent does not have to live in your home to qualify. You may be providing support for them to stay in their own home or to live in a retirement home.
    • You file a tax return with only your income, your deductions, and your credits.
    • You benefit from lower tax brackets and a higher standard deduction than Single filing status.

 

Qualifying Widow(er) or Surviving Spouse

  • A surviving spouse can continue to use Married Filing Joint tax rates and standard deduction for up to two tax years following the death of a spouse if they meet the following requirements:
    • Your spouse passed away and you haven’t remarried.
    • You provide more than half of the support for a qualifying child, including biological child, stepchild or adopted child, but not foster child. You must be able to claim the child as a dependent
  • If you still meet all of the above requirements after the two-year period, then may be eligible for Head of Household status.

If you have questions about your tax filing status or are interested in tax planning services, please give us a call at 816-259-5060 or book a complimentary consultation online at www.calendly.com/gertsemawealth.

 

 

This piece is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.

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