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When it comes to choosing the filing status on the tax return, we simply check a box and never give it a second thought. But, when it comes to taxes, nothing is as simple at it seems! Your filing status is actually very important as it can affect the amount of tax you owe for the year and even determine if you must file a tax return.
A person's filing status determines which tax rates and which standard deduction amounts apply to a specific tax return. This determination is mostly affected by what that person's marital status is on the last day of the year. In short, your marital status on December 31 is your status for the whole year.
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You must determine your filing status before you can determine whether you must file a tax return, your standard deduction, and your tax. You also use your filing status to determine whether you are eligible to claim certain deductions and credits.
Sometimes more than one filing status may apply to you. When that happens, you should choose the one that allows you to pay the least amount of tax and the biggest refund.
Here is a list of the five filing statuses and a brief description of who claims them:
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Single. Normally this status is for taxpayers who aren’t married, or who are divorced or legally separated under state law.
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Married Filing Jointly. If taxpayers are married, they can file a joint tax return.
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Married Filing Separately. A married couple can choose to file two separate tax returns. This may benefit them if it results in less tax owed than if they file a joint tax return.
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Head of Household. In most cases, this status applies to a taxpayer who is not married, but there are some special rules. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person.
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Qualifying Widow(er) With Dependent Child. This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply.
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You are considered unmarried for the whole year if, on the last day of your tax year, you are either unmarried, or legally separated from your spouse under a divorce or separate maintenance decree. State law governs whether you are married or legally separated under a divorce or separate maintenance decree.
If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year.
If you obtain a divorce for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to and do, in fact, remarry each other in the next tax year, you and your spouse must file as married individuals in both years.
If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you are considered unmarried even if you filed joint returns for earlier years. You must file Form 1040X, Amended U.S. Individual Income Tax Return, claiming single or head of household status for all tax years that are affected by the annulment and not closed by the statute of limitations for filing a tax return. Generally, for a credit or refund, you must file Form 1040X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later.
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If you are considered unmarried, you may be able to file as a head of household or as a qualifying widow(er) with a dependent child.
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To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. A married person cannot file as head of household unless he/her has lived apart from their spouse for more than six months, or was legally separated or divorced before the last day of the year.
Head of household filers are considered unmarried and have at least one qualifying person for whom they provided more than half of the financial support during the tax year, while also paying more than half the cost of keeping up a home. The cost of keeping up a home includes property taxes, utilities, rent, insurance, repairs and food consumed on the premises. Anyone claimed as a dependent by someone else cannot file as head of household.
There are two types of qualifying persons relevant to head of household status, dependent children and immediate relatives under the age of 19 (unless they are full time students or disabled) who lived in your household for more than half the year and who generated less than half of their own financial support. The rules for other qualifying persons are a bit more strict. To be a “qualified relative,” the person does not have to be related to you if they lived with you for the entire year (not including spouses), but must have earned less than a certain benchmark income and must received more than half of their financial support from you.
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Qualifying widow (or widower) with a dependent child is a filing status that allows you to retain the benefits of the married filing jointly status for two years after the year of your spouse's death if you have a dependent child.
For example, if your spouse died in 2016, and you haven't remarried, you may be able to use this filing status for 2017 and 2018. This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). It doesn't entitle you to file a joint return.
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Married people have two options for their filing status, they can either file joint returns or separate ones. But first, let us clarify what marriage means tax-wise.
You are considered married for the whole year if, on the last day of your tax year, you and your spouse meet any one of the following tests. |
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- You are married and living together.
- You are living together in a common law marriage recognized in the state where you now live or in the state where the common law marriage began.
- You are married and living apart, but not legally separated under a decree of divorce or separate maintenance.
- You are separated under an interlocutory (not final) decree of divorce.
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For federal tax purposes, the marriage of a same-sex couple is treated the same as the marriage of a man to a woman. The term “spouse” in this chapter includes an individual married to a person of the same sex. However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state law are not considered married for federal tax purposes.
You can choose married filing jointly as your filing status if you are considered married, and both you and your spouse agree to file a joint return. On a joint return, you and your spouse report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.
Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. This means that if one spouse doesn't pay the tax due, the other may have to. Or, if one spouse doesn't report the correct tax, both spouses may be responsible for any additional taxes assessed by the IRS. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.
Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return.
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If married, you can also file as married filing separately if you believe your spouse isn't reporting all of his or her income, or you do not want to be responsible for any taxes due if your spouse doesn't have enough tax withheld or doesn't pay enough estimated tax.
While filing jointly can in some cases result in lower federal tax, filing separately creates separate tax liabilities for each spouse, which can be useful in minimizing tax risks.
If you and your spouse do not agree to file a joint return, then you must file separate returns, unless you are considered unmarried by the IRS and you qualify for the head of household filing status. |
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When you are filing separately, you must still cooperate and share tax information. If you both have children, you must coordinate who gets to claim the children as dependents.
Spouses filing separately must both take the standard deduction or must both itemize their deductions.
People who choose to file as married filing separately do not qualify for several tax benefits and tax credits, such as student loan interest deduction, tax-free exclusion of Social Security benefits, Child and Dependent Care Credit, Earned Income Credit, American Opportunity or Lifetime Learning Educational Credits.
There are a couple more aspects worth mentioning as a consequence of the Tax Cuts and Jobs Act: |
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- While personal exemptions were eliminated, the standard deduction amount doubled. As of 2018, the standard deduction for married filing jointly rises to $24,000. For single taxpayers and married individuals filing separately, the standard deduction is $12,000; for heads of households, $18,000.
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- The so-called marriage penalty is almost absent. Under the previous tax brackets, if two single persons earning roughly the same taxable income per year placing them in the 25% tax bracket married, their combined income would move them into the 28% tax bracket. Under the new brackets, they would fall into the 24% marginal tax bracket, regardless of whether they got married or not. In fact, the married filing jointly income thresholds are exactly double the single thresholds for all but the two highest tax brackets in the new tax law. In other words, the marriage penalty has been effectively eliminated for everyone except married couples earning more than
$400,000.
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As you can see, when it comes to taxes, even the “simple” matter of your filing status may turn into a complicated hurdle. This is one of the numerous reasons why we advise you to get help from a tax professional to make sure that you comply with the old and new regulations and, at the same time, take advantage of all the deductions and credits you are
entitled to. |
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