Head of Household: Guide to Filing Taxes
It's that time of the year again, and you're wondering what to do with your federal income tax return. You may be filing as a head of household, which means you paid more than half the costs associated with maintaining a home and may be eligible for various tax deductions and tax credits.
If this is true for you, then make sure to read this guide on filing taxes. This article will discuss what the status means, its qualifications, and other relevant information about it, such as how to file your taxes, claim deductions, and understand your tax situation.
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Who is Eligible to Be the Head of Household?
In the IRS rule book, to qualify as a head of household, there are certain requirements you must meet that pertain to marital status, cost coverage for the home and the presence of a qualifying dependent.
To begin with, you must be single or be regarded as single as of the last day of the tax year. If you satisfy the following requirements, the IRS will consider you to be single for federal income tax purposes, which can impact your taxable income and tax rate:
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You have a divorce or a separation agreement.
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During the final six months of the year, your spouse didn't reside with you.
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You and your spouse must file your tax returns separately.
The IRS will treat you as married for federal income tax purposes if the circumstances surrounding your separation are transitory, which can affect your ability to file your return as head of household. Military deployment, residing in a medical treatment facility, or enrolling in college are examples of temporary separations that qualify.
Second, you must have paid more than half the cost of 'keeping up a home' for the year, including expenses like mortgage interest, state and local taxes, and charitable donations that can be tax deductible. The IRS bases this on the cost of actual home expenses, such as mortgage, rent, utilities, property taxes, groceries and house repairs.
Clothing, education fees, medical costs, vacations, life insurance, and transportation are not included as part of home expenses. If you pay more than half of your family monthly expenses out of your own salary or savings, you can still file your taxes as head of household even if you receive child support or alimony, potentially qualifying for the earned income tax credit.
The last requirement is that you must spend more than half the year living at home with a qualifying dependent. Many people who register as heads of household have children as their qualifying dependent.
You may claim your biological child, stepchild, foster child, sibling, stepsibling, half-sibling, or a descendant of any of these individuals, such as your grandchild, as a qualifying child, impacting your adjusted gross income and eligibility for refundable credit.
Head of Household Qualifications
The following are the three essential requirements to qualify as a head of household:
1. You Are Unmarried, Recently Divorced, Or Legally Separated From A Spouse
You must have spent the last six months of the year living apart from your spouse. Separations resulting from one spouse being away at school, working elsewhere, or in military service do not qualify.
2. You Must Contribute More Than Half Of The Household Expenses
The IRS Publication 501 states that expenses constitute rent, mortgage interest payments, property taxes, insurance payments, maintenance, and utilities, which can all affect your tax deductions and tax liability. The following items are not included: clothing, education, medical treatment, vacations, life insurance, and transportation.
3. A "Qualified Dependent" Must Reside In Your Home For More Than Half A Year
Children, stepchildren, adopted or foster children, grandchildren, or siblings may be considered dependents when calculating how much tax you owe. The youngster must also be younger than 19 years old (or under the age of 24 if a full-time student) to be a qualifying child, which can help you claim deductions and tax credits.
If the relative is fully and permanently incapacitated, regardless of age, you can also include them as a qualified dependent, which may reduce your tax liability.
However, if the dependent is a sibling, they must be your age or younger and have an annual gross income of less than $4,300 to qualify, which impacts your federal income taxes and how much money you owe. The gross income test does not apply to a qualifying child but applies to a qualifying relative.
A parent, brother, sister, half brother, half sister, stepbrother, step sister, son, daughter, grandchild, and other relatives such as father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law could be seen as qualifying relatives as well, impacting your taxable income.
If you pay for half of their housing expenses, especially if they reside in a nursing facility, you can claim your parents as a dependent even if they do not live with you. The same is true for a college-aged youngster. Again, they cannot have a gross income of more than $4,300.
Tax Returns
Once you have determined you meet the three criteria for filing as head of household, either an IRS Form 1040A or Form 1040 to file your tax return and claim this status, ensuring you include all necessary tax documents. To indicate your status, check the "Head of Household" box after entering your personal information.
Tax Benefits of Filing as Head of Household
Filing as a Head of Household has advantages such as a higher standard deduction and lower tax brackets, which can help you determine how much tax you owe and potentially reduce the amount of money you owe, which can lead to a larger tax refund and reduced tax liability.
For the 2023 tax year, the standard deduction for a head of household will be adjusted for inflation. It's important to reference the updated figures from the IRS or consult with a tax preparer to ensure you're using the most current information to ensure accurate calculations of your adjusted gross income and taxable income during tax season. It is less than the standard deduction for married couples and survivors. The tax rates are also more advantageous.
If you are thinking about filing as a Head of Household, be sure you understand the rules, including how to claim deductions and tax credits, and ensure you meet them to avoid issues with the federal government. The IRS will almost certainly scrutinize these to ensure that you genuinely qualify.
The Bottom Line
There are many ways you can complete your tax filing, from hiring a tax professional to using tax preparation software or doing it all online through services like IRS Free File. We hope that our guide has helped clear up any questions you may have had about what is required for each type of taxpayer and which methods will work best for your situation.
If you're under the head of household category and need to create an invoice, or you would like to learn more about how this status affects your taxes, you can head over to the IRS website, use IRS certified volunteers, or call their helpline at 800-829-1040 for more information.
