The head of household filing status alleviates the financial burden placed on single parents and others who are responsible for the financial support of an entire family. But many people don’t know what it means or are apprehensive to use it lest they make a mistake and have to deal with a headache from the IRS. As a result, they pay more taxes than they need to.
Head of household means that you’re legally single or have lived apart from your spouse for at least six months, and:
- You have a qualifying child or dependent and can claim a dependency exemption for the individual. Qualifying dependents are children, including adopted and foster children; siblings, stepsiblings and their dependents; and dependent parents.
- You paid more than half the cost of keeping up a home for the year.
- Your qualifying family member or dependent, other than a dependent parent, lived with you in your home for more than half the year. Your dependent parent may have lived in their own home, but you must have paid over half the cost of maintaining their primary home.
The stipulation that you must be single to file as head of household can get tricky if you are married to a nonresident alien — i.e., a foreign citizen. For example, if you got married in another country, or you married in the U.S. but your spouse does not yet have a green card or legal residence in the U.S., you can file head of household as long as you meet the other criteria and you don’t treat your nonresident spouse as a resident alien elsewhere on your tax return.
The Benefits of Filing as Head of Household
The IRS states that if you qualify for head of household filing status, your tax rate will usually be lower than the rates for single or married filing separately. In addition, you’ll receive a higher standard deduction than if you file as single or married filing separately.
In fact, the head of household can claim a 50% larger deduction than single filers can ($18,650 vs. $12,400), according to CNBC. You also benefit from wider tax brackets on lower income levels. “For example, a head of household pays a 10% tax rate on income up to $14,100 compared to $9,875 for single filers, and 12% on income up to $53,700 vs. just $40,125 for single filers,” CNBC adds.
One of the biggest benefits of filing as the head of household this year is that it increases the income threshold for stimulus payments, meaning you qualify for a payment with higher income than if you filed single or married filing separately. The head of household income threshold is $112,500, whereas for single filers it’s $75,000.
In the past, there were no requirements to prove head of household status — if you or your accountant determined that you qualified, you would just select the option. However, now you must fill out and submit Form 886-H-HOH with or prior to your tax return to verify your head of household status. The form is also a great tool to help you see if you are one of the millions of Americans who can benefit from these tax breaks.
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