Altering your tax filing status from Single to Head of Household (HoH) has a considerable influence on your tax burden. The change usually comes with a higher standard deduction and better tax brackets. Nevertheless, it is vital to know the requirements and effects to avoid violations and reap maximum benefits.
What is the head of household filing status?
The “Head of Household” designation applies to single taxpayers who maintain a house for a qualifying relative. The qualifying relative could range from a child to any number of relatives. Filing as Head-of-Household will give you the following benefits:
- A higher standard deduction: For example, apart from the single ones who received a standard deduction of $12,550 for 2011, heads would receive an $18,800 standard deduction for that year.
- Brighter tax brackets: This can save you overall tax rate than if filed in single status.
Who qualifies as a head of household?
To be eligible for the HoH status, you must meet the following criteria:
- Unmarried or considered unmarried: You must be single, divorced, legally separated, or have lived apart from your spouse for the last six months of the tax year.
- Maintain a home: You must have paid more than half the cost of keeping up a home for the year.
- Qualifying person: A qualifying child or relative must have lived with you for more than half the year, except in certain cases like a dependent parent.
Who is considered a qualifying person?
A qualifying person can be:
- Qualifying child: Your child, stepchild, foster child, sibling, or a descendant of any of these who lived with you for more than half the year and meets age and support tests.
- Qualifying relative: A parent, grandparent, or other relative who meets specific income and support requirements. Notably, a dependent parent doesn’t have to live with you, but you must provide more than half of their living expenses.
How does changing your filing status affect your taxes?
Switching to HoH status can provide several tax advantages:
- Increased standard deduction: As mentioned, the standard deduction for HoH is higher than that for Single filers, reducing your taxable income.
- Favorable tax brackets: HoH filers benefit from wider tax brackets, which can lower the marginal tax rate applied to your income.
- Eligibility for credits: Certain tax credits, such as the Earned Income Tax Credit and Child Tax Credit, may offer higher benefits or have higher income limits for HoH filers.
Common mistakes to avoid when claiming head of household status
To ensure you correctly claim HoH status, avoid these common errors:
- Incorrect qualifying person: Ensure your dependent meets all the necessary tests to be considered a qualifying person.
- Not meeting the support test: You must have paid more than half the cost of maintaining your home.
- Marital status errors: If you’re married but didn’t live apart from your spouse for the last six months of the year, you don’t qualify as unmarried for HoH purposes.
How to file as head of household
When submitting your tax return:
- Select the correct status: Pick Head of Household as your filing status.
- Complete the necessary forms: Attach any necessary schedules or forms that verify your HoH status eligibility.
- Keep records: Keep records verifying your eligibility, such as records of household expenses and documentation of your dependent’s residency.
Switching your filing status from Single to Head of Household can be very tax-saving, but you must ensure that you qualify. Letting a tax professional guide you or employing good quality tax preparation manuals can help you do this switch effectively.
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