One of the key elements of determining how much tax you owe -- or how big a refund you'll get -- is the filing status you claim on your return. For most people, if you're not married, you'll end up choosing the single filing status, a catch-all category that offers reasonable opportunities for deductions, credits, and other tax breaks.
However, there's a more favorable filing status known as head of household, which some unmarried people are allowed to choose. There are restrictions on who qualifies to be a head of household, but the tax benefits if you do are substantial. Let's look more closely at what it takes to claim head of household status and why it can be lucrative to do so if you can.
Wider tax brackets mean savings for head of household taxpayers -- but not as much as in past years
The most obvious way in which someone claiming head of household status can save big on their taxes is that the tax brackets are much wider than the corresponding single brackets. That means that more of a head of household's earnings gets taxed at lower rates, so the more you make, the greater the savings from getting to file as a head of household.
However, the savings from head of household status aren't as comprehensive as they were in past years. To see how this works under tax reform, take a look at these two sets of brackets that apply to single and head of household filers for the 2018 tax year.
As you can see, although the brackets for the 10%, 12%, and 22% are different, all the higher tax brackets are the same. Under previous law, all but the top two brackets gave a preference to head of household.
The upshot of the new rules is that there's a maximum you'll be able to save from the tax brackets using head of household status. If your taxable income is $51,800 or more, then your taxes will be about $1,400 less using head of household status than for someone with the same taxable income using single status.
However, there are other benefits to filing as a head of household. A higher standard deduction applies -- $18,000 versus $12,000 in the previous tax year -- and that can reduce taxable income to produce hundreds or even thousands more in tax savings. In addition, income thresholds for claiming other deductions and credits are sometimes higher for those filing as a head of household than for a regular single filer.
How you can qualify for head of household status
In order to be a head of household, you must be unmarried or considered so on the last day of the tax year. The only way to claim head of household status if you're married is to file separately and have your spouse not live in your home during the last six months of the tax year.
You're also required to pay more than half the cost of upkeep in providing a home for a qualifying person over the course of a year. That means that if someone else is covering most of the costs associated with where you live, then you won't qualify as a head of household.
Finally, you need to have a qualifying person live with you for more than half the year. This requirement prevents more than one person from claiming head of household status for the same qualifying person.
Qualifying persons come in two categories. Qualifying children must be 18 or younger at the end of the year, unless they're either a student younger than 24 or disabled. Qualifying children must be related to you, but you don't necessarily have to be their parent, as they can be your grandchildren, brothers or sisters, or several other kinds of relatives. Qualifying children aren't allowed to file joint tax returns if they're married, and you must provide at least half the financial support for the child during the year.
The other category is qualifying relatives. This is a broader category that can cover children outside the age requirements above, as well as others such as older parents or grandparents that you can claim as a dependent. More stringent residency and financial support requirements apply to qualifying relatives. For all the details, this IRS publication on head of household status can help you parse through the requirements to see if you qualify.
Pay less in tax
Filing as a head of household can save you money when you prepare your tax returns. Even though tax reform has taken away some of the benefits, it's still worth it to claim the head of household status if you qualify.
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