Choosing Between Single MFJ or Head of Household Filing Status
Once upon a time, filing status was straightforward. But the changing nature of the American family has affected income tax returns. Blended couples or unmarried individuals head more than half of American households. Furthermore, tax laws have become increasingly complex over the years. Filing status significantly impacts tax liability.
At Phoenix Tax Consultants, our tax planning attorneys help transform complex decisions, such as the best possible filing status, into simple matters. We carefully review your family’s composition and, considering ever-changing laws and regulations, position you for a significant refund through an obscure line item many taxpayers overlook. The government only wants your money, and we only want to help you.
Single Person
The simplest filing status applies if the taxpayer is unmarried, divorced, or legally separated as of the last day of the tax year and does not qualify for any other status.
This option works best for individuals who live alone or do not support dependents. Note that a dependent doesn’t necessarily live under the same roof as the taxpayer. A Phoenix Tax Consultant professional can furnish the necessary details.
While it is straightforward, single filers typically receive a smaller standard deduction and are in less favorable tax brackets than married filing jointly or head of household. If you qualify for another status, filing as single usually isn’t the most tax-efficient option.
Married Filing Jointly
MFJ is often the most beneficial status for married couples. If you were married as of December 31 of the tax year, you can usually file jointly, combining both spouses’ income and deductions on one return.
This status contains the largest standard deduction and the widest tax brackets. This combination often lowers the overall tax rate, especially if one spouse earns significantly more than the other. It also allows access to many tax credits and deductions that are limited or unavailable under other statuses.
The main downside is shared responsibility, or what lawyers call joint and several liability. Both spouses are legally responsible for the accuracy of the return and financially responsible for all taxes owed. If one spouse has complex finances or tax compliance issues, think carefully before signing a joint return.
Head of Household (HOH)
Perhaps the most misunderstood filing status can be very advantageous. This status is designed for unmarried taxpayers who shoulder the majority of household expenses while caring for a qualifying dependent.
To qualify, you generally must be unmarried (or considered unmarried) on the last day of the year, pay more than half the cost of maintaining your home, and have a qualifying person, such as a child or, in some cases, a dependent parent, living with you for more than half the year. The HOH standard deduction is much larger than the single-person deduction. Furthermore, HOH tax brackets are wider.
However, eligibility rules are strict. Not every single parent with a minor child at home is a head of household, according to the IRS.
To decide which status is right for you, begin with your legal marital status on December 31. Next, consider who lives with you and whom you financially support. Finally, consider how much of the household costs you pay and whether your dependents meet IRS criteria. To help ensure the largest possible refund, contact us online or call 610-933-3507.