Understanding Your Filing Status
Choosing the right filing status will result in your lowest income tax
A taxpayer's filing status depends on their personal circumstances. Are they married? Do they have dependents? Identifying your correct filing status is critical because this determines the tax rates you'll pay and the standard deduction that applies to your income for the year. It can have a significant impact on how much you owe the Internal Revenue Service 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.
You can use one and only one status when you complete your tax return, and the qualifying rules can seem a little conflicting and confusing. The IRS offers five statuses that you can choose from: single, head of household, married filing jointly, married filing separately, and qualifying widow(er).
A Comparison: Standard Deductions
Your standard deduction for tax year 2020 is $12,400 if you're single and if you don't qualify for the advantageous head of household status. This is up from $12,200 for the 2019 tax year.
The standard deduction increases to $18,650 if you qualify as head of household, up from $18,350 in 2019. That's a significant $6,250 more you can shave off your taxable income than if you have to use the single status.
It's $24,800 for married taxpayers filing jointly, double the amount for single filers, but spouses who file separate married returns are limited to the same $12,400 as single taxpayers.
Qualifying widow(er)s are entitled to claim the same standard deduction as married taxpayers who file jointly, but only for two years.
Another Comparison: Tax Rates
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, up to $85,525.
- These numbers also 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 $53,700 for 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 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 overall total income so you're only taxed on the 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 considered married if you're simply living apart by agreement.
The Married Filing Jointly Status
You can elect to file one tax return jointly with your spouse if you're married. A joint tax return combines your incomes and deductions on one return. Both you and your spouse must agree to file a joint return, and you must both sign it.
Married filing jointly (MFJ) provides several more tax benefits than filing separate married returns, but it also means that you and your spouse are each responsible for the accuracy of the return and for payment of any tax due. The IRS refers to this as being "jointly and severally liable."
If it turns out that you owe $15,000 in taxes on your combined incomes, the IRS can collect the full amount from you personally even if you only earned 10% of the income that produced those taxes and your spouse was the primary breadwinner.
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, however, 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 is nonetheless the one way to achieve separate tax liabilities. 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. 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—the returns have to "match" in this respect.
While filing jointly can result in lower federal tax in many cases, 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, you're divorced, your spouse is deceased, 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 advantageous 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 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 under certain circumstances, even if they're not legally divorced or legally separated yet. For example, you can qualify if you and your spouse never lived together during the last six months of the tax year provided that you meet other requirements.
The IRS considers you unmarried if you have a child dependent and you haven't lived with your spouse at any time during the last six months of the tax year. 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, but the IRS offers some flexibility here. If your dependent is a closely-related relative, such as a parent, they don't have to live with you, but 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 a 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.
Confused? Get Help From the IRS
The IRS stands by ready to help if you're still not certain of your correct filing status. It offers an interactive tool 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.
IRS. "Module 5: Filing Status." Accessed Feb. 17, 2020.
Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2020," Accessed Feb. 17, 2020.
Tax Foundation. "2020 Tax Brackets," Accessed Feb. 17, 2020.
Taxpayer Advocate Service. "Know How Getting Married Changes Your Tax Situation." Accessed Feb. 17, 2020.
IRS. "Publication 504 (2019), Divorced or Separated Individuals." Accessed Feb. 17, 2020.
Internal Revenue Service. "Choosing the Correct Filing Status," Accessed Feb. 17, 2020.
IRS. "Publication 501 (2019), Dependents, Standard Deduction, and Filing Information." Accessed Feb. 17, 2020.