TAX TIP No. 5
Status makes a difference in your tax bill
4. Head of household: This status applies to unmarried taxpayers who during
the tax year provided more than half the cost of keeping
up a home for the filer and a qualifying person who
lived in the home for more than six months. Tax rates
for qualified filers usually are more favorable than
those in the single or married filing separately categories.
Head of household filers also get a larger standard
deduction amount than do single filers. In some cases,
married persons who have not lived with their spouses
may qualify for this status.
widow or widower with a dependent child: You can
still file a joint return for the tax year in which
your spouse passed away. After that, you might be eligible
to file as a qualifying widow or widower.
This filing option is available for two years following
the year of a spouse's death and basically applies the filing data
afforded married joint filers. The key here is that the surviving
spouse cared for a dependent child who lived with the adult for
the full tax year. During that time, the taxpayer must have paid
for more than half the cost of keeping up the home.
Under qualifying widower status, for example, a man whose wife died in 2006 could use this category for 2007 and 2008 returns. His status would have been married filing jointly on his 2006 return, the year he lost his wife. But for the two subsequent tax years as a single father, he is able to use the joint tax rates and, if he doesn't itemize, could claim the highest standard deduction amount.
Picking the right filing status isn't always easy;
some individuals find they actually qualify to file as more than
one type of taxpayer. This could be the case for a divorced mother.
Although technically she could file as a single taxpayer, it would
be a smarter tax move to file as a head of household because she is
taking care of dependent children. Head of household would give
her a tax rate lower than the single filer's rate, plus she'd get
a bigger standard deduction.
So take the
time to examine your personal
situation and how it fits
into the various filing status
Publication 501 provides
more details on each status's
requirements, as well as specific
exceptions, examples and work
sheets to help you make the
appropriate filing choice.
And always keep in mind that the IRS lets
you file under the applicable status that offers you
the best tax advantage. The tax savings you might get
by selecting the correct status could make any extra