Three basic rules determine whether a taxpayer qualifies as head of household, and you must meet all of them. 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.
Two people can conceivably meet these criteria if they live at the same address, but it comes down to numerous, interlocking, qualifying factors. Some are carved in stone, while others can vary somewhat under different circumstances.
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 significantly more than that which is offered to single individuals: $18,650 in the 2020 tax year versus just $12,400 for single filers. That's a significant difference.
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 legally divorced and haven't remarried, but 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 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 you've elected not to treat them as a resident alien for tax purposes. You can't claim your spouse as a dependent for purposes of qualifying, however.
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. The individual must live in your home for more than half the year, although the IRS makes an exception to this rule for parents 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 additionally pay for more than half the cost 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 whether each family living there is a separate household 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 and instead refer to separate economic units living inside the same residence.
The IRS has indicated 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 of their situation.
An Example 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, and neither is married. They split the rent, the utilities, and the grocery bill. Neither would normally qualify as head of household because 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 and 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 Separate 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 the following:
- 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.
- The children have separate bedrooms.
- The family members don't celebrate holidays or birthdays together.
Professional Advice Is Recommended
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 filing as head of household must be supporting a dependent. Someone who is filing as single isn't supporting a dependent. Filing as head of household gives you a higher standard deduction and a lower tax rate than filing as single.
What's the penalty for filing as head of household while married?
While there's no specific penalty for filing as head of household while married, you could be subject to a failure-to-pay penalty, which is one-half of one percent for each month you didn't pay up to a maximum of 25%. If the IRS finds you were negligent, you could owe another 20% of the amount you underpaid. In cases where the IRS finds tax fraud, the find is up to $250,000 for individuals.