Filing tax returns is probably the most taxing part for any employee who takes a salary. For any average person, filing is important to their financial structure since they do not want tax authorities looking over their head. But what if this burden could be curbed?
Well, if you are single, then you may have some relaxation regarding filing returns. Single persons and unmarried partners are eligible for head-of-household taxes with their perks. In this article, we explore the same.
Read on to save some money and responsibly file returns!
The concept of Head of Household
For all practical purposes, a Head of Household is unmarried and has taken full responsibility for any qualifying person. Such a head receives an incentive that devolves around a lesser tax rate structure. In addition to a lower tax rate, the standard deduction is high, providing double benefits. The Head of Household option provides financial support for those who care for persons solely based on their income and do not have a married partner to share expenses.
The definition of unmarried
To become eligible for the IRS head of household status, the applicant must satisfy what defines unmarried.
- Irrespective of a partner, you must file your returns separately
- If you had a spouse earlier, they must not cohabit with you in the same home for at least six months preceding the tax year.
- You must bear half or more than half of the costs of the total household expenditure and the qualifying person.
- In the case of a child, you must have a claim over it, and an exception can be made only if you do not have custody.
Financial Eligibility for a Head of Household
- The single person shall ensure they take responsibility for half or more of the household expenditure.
- The person must be legally unmarried on the penultimate day of the taxation year.
What is a Qualifying Person?
Simply speaking, a qualifying person is essentially a child. This includes a biological child and any minor who co-habits the house consecutively with the Head for at least six months. Additionally, someone between 19-24 with a full-time college debt borne by the Head also qualifies as a qualifying person.
In the case of divorced parents, this definition may change slightly based on which parent has custody. However, any child who co-habits a parent’s house for six months or more becomes a qualifying person.
What is a Qualifying Dependant?
If, in case, you do not have a responsibility towards someone who doesn’t fall under the ambit of a qualifying person, you may still be eligible to become Head of Household if you are responsible to someone known as the qualifying dependant. This includes any relative, either biological, foster, or in-law. (Adopted child, Step-brother, son-in-law, etc.). Such an option is usable when you do not have a child per se to whom you have a responsibility but still claim the Head of Household status as you have some other entity to cater to.
Obtaining head of household status without a claim on the dependant
This scenario arises when a parent has no claim over their child due to legal non-custody. Even in such a case, you may file as Head of the household if the child remains in your place of stay for over six months and you bear at least half or more than half of the costs of raising such a child.
Further, remaining unmarried is imperative, and the claimant must guarantee that they shall not claim custody of the child in six months.
How do I file as a Head of the Household?
Single Head of Household
This entails filing as a single person responsible for a qualifying person. The Head of Household must satisfy all conditions mentioned above and register for a lower tax return.
Two people living together but unmarried
In this situation, the process is slightly more complex. Both partners must be responsible to someone who qualifies as a dependant, and this dependant must have close relations with both partners. Further, both partners must ensure that the dependant resides in a common place and bear half or more than half of the costs to run the household with the dependant residing in it.
Comparison of Head of Household with other filing structures
Head of Household versus Single filing structure
Having a head of household status makes you eligible for larger refunds. For instance, if you file as single without a head of household status, you would gain close to $12,900. On the other hand, filing as head of household enables you to earn over $19,400. So, even if you have a lesser income, filing as head of household puts you on the lower tax slab and gives you almost a 50% reduction compared to a single filing.
Head of Household versus Married filing structure
In all honesty, a head of household filing status does not supersede the status of filing jointly as married couples. For a married couple, the deduction is around $25,500, almost 30% more than that of a head of household return.
Frequently Asked Questions (FAQs)
Can a partner itself be a dependent?
Generally speaking, a partner or a boyfriend/girlfriend does not have a dependent status as they do not satisfy the definition of a relative, and thus, the facility of head of household is unavailable for them.
Should I file single or head of household?
If you are single and eligible for head of household, then file for head of household without a doubt. This is simply because there are many perks. Even with a lower income, you can earn more due to higher returns.
What constitutes expenditure for this status?
Only certain purchases are notified in a taxable year if you wish to claim head of household status. These purchases shall be made towards rent, mortgage, utilities, groceries, repairs, property taxes, or insurance.
A head of household gets how much standard deduction?
For 2022, the standard deduction stood at $19,400, while 2023 was pegged at $20,800.
Can I file for Head of Household status if I am married?
While an unmarried relationship is the most significant criterion for this status, you may also choose to file for the status if you are married in case you do not cohabit with your spouse for a consecutive six-month period and have a child with the spouse whom you provide for and bear at least half or more than half of their expenses.
Conclusion
Obtaining tax returns is a boon for any middle-class household and anyone who files for the same looks for some money to save. Considering this, it is perfectly right to explore the incentives available to various categories under taxation. We hope readers have good insights into what constitutes a Head of Household filing status and are now clear if it is better to file single or Head of Household.
