Most Americans file their taxes under one of two filing statuses: "single" or "married filing jointly." However, there are other filing statuses, and the main alternative is "head of household."
Filing as head of household can save you hundreds or even thousands of dollars on your tax bill. However, some specific criteria need to be met in order to claim this potentially lucrative tax filing status.
With that in mind, here's an overview of what head of household status is, why it can be such a valuable tax break, and whether you can claim it.
What is the head of household tax filing status?
While this is an oversimplification, and we'll get into the details in a bit, the head of household status is intended to benefit taxpayers who have children or other dependents but are not married and therefore cannot qualify for the "married filing jointly" tax status.
In order to claim head of household status, all three of the following things must be true:
- You must maintain a household for which you pay more than half of the expenses. This means you pay for at least half of the mortgage or rent, utilities, insurance, taxes, etc., as well as at least half of the ongoing household expenses like groceries.
- You must be considered unmarried. You cannot file a joint tax return, and your spouse (if you technically have one) cannot have lived in your home at any point during the last six months of the tax year, based on the last day of the year. So, to claim head of household on your 2020 tax return, you would need to be considered unmarried on December 31, 2020.
- You must have a qualifying child or dependent. For a child, they must have lived in your home for more than six months during the year and be under 19 (under 24 if a full-time college student). And your child cannot be independent, meaning they cannot have paid for more than half of their living expenses during the year. Other dependents could include a sibling, grandchild, parent, or other relative if you paid for more than half of their household expenses for the year.
Why does head of household status matter?
In short, "head of household" status will generally make your tax obligation significantly lower than if you file your tax return as "single." Head of household filers get a higher standard deduction and more favorable tax brackets. To see just how much of a difference it can make, let's look at these one at a time.
Higher standard deduction
Ever since the passage of the Tax Cuts and Jobs Act, which went into effect in the 2018 tax year, the vast majority of Americans use the standard deduction instead of itemizing. And for head of household filers, the standard deduction is 50% higher than if filing as single.
Here are the standard deductions for 2020: