Three basic rules determine if a taxpayer qualifies for the head of household filing status, and you must meet all of them. Two people can meet the criteria if they live at the same address, but it comes down to numerous factors. Some are carved in stone, while others can vary somewhat under certain circumstances.
You have to be unmarried, or you must be "considered unmarried." You must have a qualifying dependent, and you must pay more than half the cost of maintaining your home for the year.
- Head of household filers get higher standard deductions, and they can earn more before moving into a higher tax bracket.
- HOH filing status depends on three firm rules: You must be considered unmarried, have at least one dependent, and pay more than half your household costs.
- Two people living at the same address might be able to meet these rules if they take steps to segregate their finances and personal lives.
Why File As Head of Household?
The head of household (HOH) filing status is advantageous in a couple of ways. The standard deduction available to these taxpayers is much more than that which is offered to single persons: $18,800 in the 2021 tax year, the tax return you'll file in 2022. Compare this to just $12,550 for single filers.
Standard deductions are indexed for inflation, so they go up in 2022 to $12,950 for a single filer versus $19,400 for a head of household.
The HOH tax brackets also accommodate more income, so these taxpayers can earn more before paying a higher percentage in taxes as well.
Qualifying Rules: You Must Be Unmarried
The first qualifying test for HOH status is that you must be unmarried or "considered unmarried" as of the last day of the tax year. You would qualify if you were never married, or if you're legally divorced and haven't remarried. You can also qualify if you didn't live with your spouse at any time during the last six months of the tax year. This is the test for being considered unmarried.
Temporary absences such as attending school out of state or incarceration don't count. Your intention when you move into separate households must be that you and your spouse are not going to begin living together again.
You would be considered unmarried if your spouse was a nonresident alien at any point during the year, and if you've elected not to treat them as a resident alien for tax purposes. But you can't claim your spouse as a dependent for purposes of qualifying for HOH filing status.
You Must Have a Dependent
You must also be able to claim a closely-related person as a dependent. Your dependent can be either a qualifying child or a qualifying relative. They must live in your home for more than half the year, although the IRS makes an exception to this rule for parents and other close relatives if you pay more than half the cost of keeping up their home during the year.
The IRS also offers a special provision for divorced or separated parents. You would still qualify as head of household if you're the custodial parent and your child lives with you more than half the year. But you've relinquished the right to claim the child as a dependent for other tax purposes, allowing their other parent to do so.
You Must Pay More Than Half Your Home's Costs
You must also pay for more than half the costs of maintaining your residence during the tax year. Allowable costs include mortgage interest or rent payments, utilities, property taxes, property insurance, groceries, and other household items. They don't include health insurance, clothing, or entertainment.
When Two Taxpayers Share the Same Address
The question becomes whether the address itself constitutes one household, or if each family living there is a separate household unit if two or more taxpayers share the same address. The term "household" is what generates the tax issue. It can mean one single residential structure, or it might have less of a physical meaning. It might instead refer to separate economic units living inside the same residence.
The IRS has stated that the HOH status isn't a matter of a physical address. Rather, it's defined by the totality of all the facts of the case.
It doesn't automatically mean that two taxpayers can't both be heads of households because they physically share a residence. But they must carefully analyze the actual circumstances.
A Case of Two Households
Let's say that Sam and Sally are roommates. They lease a house together. They each have a dependent child who lives with them. Neither of them is married. They split the rent, the utilities, and the grocery bill. Neither would qualify as head of household. Each is paying 50% of their joint household bills, not more than half.
But they might qualify under IRS rules if they and their children maintain totally separate lives within the home. They don't share meals. They have separate cable TV or streaming services. Sam hires a babysitter for his child if he's going out for the evening, even if Sally is home.
They're simply two families sharing the same physical structure. They're two separate economic entities, so each could qualify as head of household.
Proving That Two Households Exist
According to the IRS, taxpayers who share the same physical address must prove that they live as separate households and that they have independent lives outside the residence. Some factors that can weigh in favor of two separate households sharing the same physical residence might include:
- Each family has separate telephone lines.
- The taxpayers maintain separate finances and separate bank accounts.
- Neither family contributes financial support to the other.
- The adult taxpayers have separate bedrooms.
- Their children have separate bedrooms.
- The family members don't celebrate holidays or birthdays together.
Taxpayers who feel that they might qualify as head of household even though they share the same physical address with another taxpayer should seek advice from an experienced tax professional.
Frequently Asked Questions (FAQs)
What's the difference between filing as single and filing as head of household?
Someone who's filing as head of household must support a dependent. Someone who's filing as single doesn't have to do so. Filing as head of household gives you a higher standard deduction and lower tax rates than filing as single.
What's the penalty for filing as head of household while married?
There's no tax penalty for filing as head of household while you're married. But you could be subject to a failure-to-pay penalty of any amount that results from using the other filing status. This is 0.5% (one-half of one percent) for each month you didn't pay, up to a maximum of 25%. You might also be subject to fines for negligence or tax fraud.