A taxpayer's filing status depends on individual circumstances. Is the filer married? Does he or she have dependents? Identifying your correct filing status is critical because it determines the tax rates you'll pay and the standard deduction that applies to your income. It can have a significant impact on how much you owe the Internal Revenue Service (IRS) at year's end—or how much of a refund the IRS owes you.
In some cases, choosing an incorrect filing status can result in an audit.
The IRS offers five statuses you can choose from, but you can only use one of them when you complete your tax return:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er)
Why Your Tax Filing Status Matters
Your standard deduction for tax year 2020 is $12,400 if you're single and you don't qualify for the advantageous head-of-household status. This deduction increases to $12,550 for the 2021 tax year.
The standard deduction increases to $18,650 in 2020 if you qualify as head of household, and it goes up to $18,800 in 2021. That's a significant $6,250 more you can shave off your taxable income in 2020 than if you have to use the single status.
The 2020 standard deductions for the return you’ll file in 2021 break down like this:
|Married Filing Jointly||$24,800|
|Married Filing Separately||$12,400|
|Head of Household||$18,650|
Qualifying widow(er)s are entitled to claim the same standard deduction as married taxpayers who file jointly, but they can only do so for two years after the death of their spouse.
As for tax rates, let's use the 22% bracket as an example:
- Single filers pay this rate on the portion of their incomes that exceeds $40,125 in 2020, up to $85,525.
- These numbers double for married taxpayers who file jointly: $80,250 up to $171,050 as of the 2020 tax year.
- The 22% bracket begins at incomes of $53,701 for the head-of-household filers, up to incomes of $85,500, again a significant difference.
So yes, your filing status has a considerable impact on your tax liability. Depending on which status you qualify for, you can earn more before paying a higher percentage in taxes on your top dollar, and you can shave more off your total gross income so you're only taxed on the remaining balance.
Determining Marital Status
The pivotal day for determining your filing status is Dec. 31. All statuses depend on whether you're considered married or single on that particular date. You're considered married for tax purposes if you're legally married on the last day of the year and you're living with your spouse. But you're also considered married if you're separated from your spouse according to an agreement rather than a court order.
You're not considered married if you and your spouse are separated by court order, but you are if you're living apart by agreement.
The Married Filing Jointly Status
You can elect to file a tax return jointly with your spouse if you're married. A joint return combines your incomes and deductions. Both you and your spouse must agree to file a joint return, and you must both sign it.
The married filing jointly (MFJ) status provides several more tax benefits than filing separate married returns. But it also means that you and your spouse are “jointly and severally liable” for the joint return: You’re each individually responsible for the accuracy of the return and for payment of any tax that’s due.
In other words, the IRS can collect the full amount from you personally if it turns out that you and your spouse owe $15,000 in taxes on your combined incomes, even if you only earned 10% of the money that produced those taxes.
Married Filing Separately
You and your spouse can also file separate tax returns if you're married, but married filing separately (MFS) taxpayers receive the least beneficial tax treatment under IRS rules.
Spouses who choose to file separately won't qualify for several tax benefits and credits, including the earned income tax credit or the American Opportunity education credit. The child tax credit and child and dependent care credit are negatively affected as well.
MFS status nonetheless provides a way to establish a separate tax liability from your spouse. A married couple might want to file separately because:
- One spouse wants to file taxes, but the other doesn't want to file.
- One spouse suspects that the joint return might not be accurate.
- One spouse doesn't want to be held responsible for the payment of the full tax shown on the joint return.
- One spouse owes taxes, while the other would get a refund.
- Spouses are separated but not yet divorced, and they want to keep their finances as separate as possible.
You must still cooperate and share tax information with your spouse if you file separately, and you'll have to coordinate who gets to claim your children as dependents, if you have any. Spouses filing separately must both take the standard deduction, or they must both itemize their deductions—their returns have to "match" in this respect.
Filing jointly can result in lower federal tax in many cases, but filing separately creates separate tax liabilities for each spouse, which can be useful in minimizing tax risks.
The Single Filing Status
The single status is used by people who are unmarried on the last day of the year. You've either never been married, or you're divorced, your spouse has been deceased for more than two years and you didn’t remarry, or you're separated by court order. You don't have any dependents, or at least you don't have any that could qualify you for the more beneficial head-of-household or the qualifying widow(er) statuses.
The single status is essentially a catch-all basket for those who don't qualify for one of the other four statuses.
Head-of-Household Filing Status
You might be eligible for the head-of-household (HOH) filing status if you're unmarried or considered unmarried on the last day of the tax year, and if you've been taking care of a dependent, such as your child, who lives with you for more than six months.
Married persons can be "considered unmarried" for purposes of qualifying for the head of household status even if they're not yet legally divorced or legally separated under some circumstances. You can qualify if you and your spouse never lived together during the last six months of the tax year—not even one day after June 30—provided that you meet the other requirements.
Temporary absences don't count, such as if your spouse is living elsewhere for business reasons, because your spouse presumably intends to return to your home at some point.
Single taxpayers who can claim a dependent must pay more than half the cost of maintaining their residence during the tax year to qualify as head of household, but the IRS offers some flexibility here. If your dependent is a closely related relative, such as a parent, they don't have to actually live with you, although you must pay more than half the cost of maintaining their household and be able to claim them as a dependent. Other non-child dependents must live with you all year.
Qualifying Widow(er) With Dependent Child Filing Status
You can still file jointly or separately as a married taxpayer for the tax year in which your spouse died, even if you don't have a dependent. You can then file under the qualifying widow(er) status if you're still unmarried and have a dependent child after the initial year of death.
This status will allow you to continue benefiting from the same standard deduction and the same tax rates as those for married couples filing jointly. You can claim qualifying widow(er) filing status for a total of two years. Your status changes to single or head of household if you're still unmarried after those two years, and you'll lose eligibility for this status if you remarry before two years have passed.
You must have at least one child as a dependent to qualify for this filing status.
The Bottom Line
The IRS is ready to help if you're still not certain of your correct filing status. It offers an interactive tool on its website that will tell you how you should file. You'll need some information at your fingertips, such as how much you paid toward keeping up your home for the year, and the tool only applies to U.S. citizens and resident aliens. It takes about five minutes to complete.