In the tax world, your filing status means everything. It determines your tax rates as well as which standard deduction you can claim.
Most of the time, your filing status is fairly straightforward. It is primarily affected by what your marital status is on the last day of the year regarding the tax return.
For example, if you were single for most of 2019 but got married on the last day of the year, you would still qualify as “married” for the 2019 tax year.
Let’s examine each filing status individually…
Single Filing Status
If you failed to get married on any day of the tax year, then you file as single. This does not necessarily mean that you are not in a relationship, just that you are not married by law.
Unfortunately, single filing taxpayers are offered the lowest standard deduction. In 2018 the standard deduction for single filers was $12,000, though that was nearly double what it was in 2017. The 2019 standard deduction rate has yet to be calculated.
Head of Household Filing Status
If you are not married but still qualify to claim a dependent on your tax return, then you are potentially eligible for the Head of Household filing status. If you qualify for Head of Household, you should file under this status as it offers more tax benefits.
If you are single and have taken care of a dependent for more than six months, you may fit the criteria. The IRS has additional guidelines for filing as Head of Household, so you should double check with a tax consultant unless you are sure that you qualify.
Qualifying Widow/Widower with Dependent Child Filing Status
If your spouse passed away within the last year, you can still file jointly or separately on your return, regardless of if you have a dependent. After the first year of death, unmarried taxpayers with a dependent child may still claim a higher status under the Qualifying Widow/Widower (QW) filing status.
The QW filing status grants the same standard deduction and tax rates as married couples filing jointly, so if you qualify you should take advantage of this filing status. QW filing status is available for a total of two years, then the filing status must change back to single or Head of Household.
Married Filing Jointly Filing Status
This filing status is fairly self-explanatory. If you are legally married and wish to file one tax return with your spouse, then you should claim this status. Essentially, this means you combine the incomes and deductions of each spouse together on one return.
Married filing jointly offers the biggest standard deduction. In 2018 that amount was $24,000. In order to file jointly, you and your spouse must agree to file a single return together. Both must sign in agreement.
Married Filing Separately Filing Status
This filing status is comparable to married filing jointly, except that you and your spouse acknowledge that you wish to file separate returns.
It is not advised as it offers fewer tax benefits compared to filing jointly. However, it does help cover separate tax liabilities in the event one is drastically different from the other. Couples who are considering divorce may consider this the best option for them.
Separated couples must still cooperate enough to share vital tax information. Additionally, if children are in the picture, there also needs to be a mutual agreement as to who gets to claim him or her as a dependent. If both spouses claim the dependent, the tax benefit will get negated.
Do you still need tax help? Levy & Associates is here to provide tax relief. We can answer any questions you have regarding filing status, including complicated “married filing separately” circumstances. Please contact us at 800-TAX-LEVY, or visit us online at www.levytaxhelp.com.