Tax Filing Status

Taxes 101

One goal my husband and I have is building our finances. Something that we’ve been working on is becoming more informed with our financial options, which includes getting our taxes done effectively.

It sounds simple, but having the right tax filing status is very important. Your tax filing status is a factor in the standard tax deduction you can take and your tax rate. On your 1040, 1040A, or 1040EZ, you will make your tax filing status selection on line 5.

What are the five options tax filing status?

Right now the IRS recognizes 5 options for tax filing status.

  • Single
  • Head of Household
  • Married Filing Jointly
  • Married Filing Separately
  • Qualifying Widow(er) with Dependent Child

I’ll describe them more in a bit. If you somehow qualify for more than one status, consider filing with the status that can give you the lowest tax rate. For example, if your status is married filing jointly or qualifying widow(er) with dependent child, you generally have the lowest tax rate.

What is the standard tax deductions you can take?

The IRS adjusts the amount due to factors such as inflation. For 2009, the standard tax deductions are:

  • Single: $5,700
  • Married (Filing Separately): $5,700
  • Head of Household: $8,350
  • Married (Filing Jointly): $11,400
  • Qualifying Widow(er) with Dependent Child: $11,400

Note: If you’re 65 or older and/or you are blind (as determined by a eye doctor), you may be entitled to a higher standard deduction.

As you can see with the different statuses, you can significantly lower the amount of your income that is taxed by choosing a filing status that fits your circumstances.

What are the qualifications for each tax filing status?

The gist of how your status is determined is based on your martial status and if you have dependents. While I’ll give some general rules, you should be aware there are exceptions. I found the information from the Publication 17 from the Internal Revenue Service.

Single

On December 31 of the tax year you filing for, you’re considered single by the IRS if you:

  • were never married
  • were legally separated or divorced
  • widowed before January 1 and did not remarry during the tax year

Depending on your personal circumstances, you may be able to get a lower tax if you fall under widow(er) with dependent child or head of household.

Qualifying Widow(er) with Dependent Child

You’re considered a qualifying widow(er) if you, as of December 31 of the tax year:

  • were widowed before January 1 of the tax year
  • have a child/stepchild that you care for all year and can claim an exemption (there are some exceptions)
  • have have kept the home, paying more than half the cost (ex. rent/mortgage, utilities, food, etc)

Note: You could file as married filed jointly if your spouse died during the tax year. After that you can file the next two years as a qualifying widow(er). According to the IRS, you can file with a Form 1040 or Form 1040A.

Married (Filing Separately)

You can be married filing separately if, as of December 31 of the tax year, you:

  • are married
  • can provide spouse’s name and social security number on the tax return

This may be an option if you only want to be responsible for your individual tax liability or if you spouse won’t agree to filing a joint tax return.

With this status you only have to report your income. If your spouses itemizes their deductions, you must as well, even if it is lower than the standard deduction.

Note: You can not claim earned income credit with married filing separately. According to the IRS, you can file with a Form 1040 or Form 1040A. In some cases, you may want to file as head of household, provided you meet the qualifications.

Married (Filing Jointly)

You can be married filing jointly if you, as of December 31:

  • are married
  • include your own and your spouse’s income
  • both sign the tax tax return

Even if you have only one income, you can still file a joint return. Please know that both spouses are responsible for taxes due.

Head of Household

You can be considered head of household if you on December 31 of the tax year if you:

  • are unmarried or consider unmarried, such as spending last 6 months apart from your spouse
  • have have kept the home, paying more than half the cost (ex. rent/mortgage, utilities, food, etc)
  • had a qualifying person living with you for more than half the year

The IRS has very specific guidelines on who is considered a qualifying person for tax purposes. You can get an earned income credit with the status.

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As you can see there are factors you need consider when choosing your filing status. Make sure you choose a status that is applicable and advantageous to you and your family.

Please be aware, I’ve done my best to ensure that the above listed amounts are current for tax year 2009, but you should always double-check to make sure that you’re working with valid information.