Wednesday, November 16, 2011

Head of Household Filing Status

Claiming Head of Household status can help lower your taxes

By William Perez, About.com Guide

You can claim the Head of Household (HOH) filing status on your tax return if you are unmarried, have cared for a dependent for over half the year, and paid more than half the cost of maintaining a home. Taxpayers claiming the Head of Household filing status benefit from a higher standard deduction and lower tax rates compared to the single filing status. The definition of HOH filing status is quite specific, so read over the criteria carefully.

You are unmarried or "considered unmarried" on the last day of the year.
You paid more than half the cost of keeping up a home for the year.
A "qualifying person" lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the "qualifying person" is your dependent parent, he or she does not have to live with you.

From the Head of Household section of IRS Publication 501.

"Considered Unmarried"

You are "considered unmarried" for tax purposes if on the last of the year you are:

unmarried,
legally separated from your spouse under a divorce or separate maintenance decree, or
married but lived apart from your spouse for at least the last six months of the year.

State law governs whether you are married or legally separated under a divorce or separate maintenance decree. For federal tax purposes, domestic partners are considered unmarried.

"Qualifying Person"

To qualify for the head of household filing status, a qualifying person needs to live with you in your home for more than half the year. The rules for qualifying persons for HOH purposes is different than the rules for dependents. Only certain types of relatives can be qualifying persons for HOH as follows:

Child, step child, adopted child, foster child, brother or sister, or a descendant of one of these whom you can claim as a dependent under the qualifying children rules;
Child, step child, adopted child, foster child, brother or sister, or a descendant of one of these whom you would be able to claim as a dependent under the qualifying children rules but choose not to claim as a dependent because you released the dependent's exemption to the noncustodial parent;
Mother or father who can be claimed as a dependent under the qualifying relative rules;
Brother, sister, grandparent, niece, or nephew whom you can claim as a dependent under the qualifying relative rules.

Note that under the qualifying relative rules, some dependents do not need to live with the taxpayer all year. That is, there is no residency requirement for children, grandchildren, siblings, and parents. However, for head of household purposes the person must live with you for more than half the year. So it is possible that a person could be your dependent but still not qualify you for the Head of Household filing status.

Special Rule for Separated Parents

Married taxpayers who are separated or estranged from their spouse may be able to file as Head of Household, even though they are not legally separated or divorced. Taxpayers who meet all five criteria below may file as HOH instead of the less favorable married filing separately status.

You file a separate return.
You paid more than half the cost of keeping up your home for the tax year.
Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances.
Your home was the main home of your child, stepchild, or eligible foster child for more than half the year.
You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules for children of divorced or separated parents.

From the Head of Household section of IRS Publication 501. Separated parents should refer to IRS Publication 504, Divorced or Separated Individuals, for additional information about these special rules.