Whether you're new to the tax game or seeking a refresher, this blog is your guide to understanding tax advantages through the Head of Household filing status.
What's the Deal with Head of Household?
If you're a parent or adult providing over half the cost of a home for a qualifying person, like a child or family relative, Head of Household filing status could be your financial game-changer. Why? Because it offers a higher standard deduction and lower tax rates compared to filing as single or married filing separately.
The Perks in a Nutshell:
More Money in Lower Tax Brackets:
Single filers in the 12% tax bracket max out at $44,725.
Head of Household? You can hit $59,850 before stepping into the 22% bracket.
Example: With a $50,000 income, filing as Head of Household could save you $620 in federal income taxes compared to filing as single.
Boosted Standard Deduction:
Head of Household gets a hefty $20,800 standard deduction in 2023.
Single and married filing separately? Only a $13,850 standard deduction for you.
To claim Head of Household, you need to:
Cover more than half of household expenses.
Be considered unmarried at the tax year's end.
Have a qualifying child or dependent.
This status isn't just for parents; single parents, divorced individuals with custody, and adults supporting relatives can qualify.
Maintaining a Household: What It Takes
To file as Head of Household, you must've footed over half the bill for maintaining a qualifying home—rent, utilities, groceries, the works. Financial assistance from others doesn't disqualify you; just ensure you're covering more than 50% with your own funds.
"Considered Unmarried" Criteria
Being "considered unmarried" at the tax year's end involves:
Paying over half of home costs.
Spouse not living with you for the last 6 months.
Your home being the primary residence for your child for at least 6 months.
Temporary separations don't count; you're considered married if living in separate homes is due to circumstances like military service or college.
Qualifying Child or Dependent Explained
Qualifying children extend beyond your biological kids. They must:
Be related to you.
Reside with you for over six months.
Be younger than you.
Meet age and support criteria.
Even if you can't claim a child as a dependent, you might still qualify as Head of Household under certain circumstances.
Head of Household vs. Other Filing Statuses
Head of Household beats single filing in tax brackets and standard deduction. While it falls short of married filing jointly, it's a solid middle ground.
Tax Brackets and Standard Deduction: The Numbers
Head of Household has friendlier tax brackets, and the $20,800 standard deduction in 2023 is a win compared to single or married filing separately. It's not as grand as married filing jointly, but it's a sweet spot.
Can Two People Claim Head of Household?
Nope. If married, it's joint filing or separate returns. While two unrelated individuals in the same home could both claim Head of Household, strict criteria apply.
Claiming a Boyfriend/Girlfriend or No Dependent?
Not for Head of Household. You usually need a qualifying child or dependent. Exceptions exist for custodial parents who can't claim a child due to certain circumstances.
How Head of Household Helps You:
Lowers your tax bracket.
Boosts your standard deduction.
Helps single parents and those supporting dependents keep more money for home expenses.
Ready to maximize your tax benefits? Remember, state-level tax filing may have different rules. If you need more assistance and guidance of Head of Household filing, request a consultation with us and we will give you the tools needed to understand and take advantage.