Understanding Your Filing Status
Choosing the right filing status will result in your lowest income tax
Your filing status determines the tax rates and the standard deduction amount that applies to your income for the year, so choosing the correct one is important. 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 Internal Revenue Service owes you. In some cases, choosing incorrectly might result in an audit.
You can use one and only one filing status when you complete your tax return, but the IRS offers five that you can choose from: single, head of household, married filing jointly, married filing separately, and qualifying widow(er). The major differentiating factor is whether whether you were married, considered married, or single on the last day of the tax year.
Note the word "considered." Whether you're married is surprisingly more complicated than it seems at first glance.
How It Breaks Down: A Comparison
If you're single and you don't qualify for the advantageous head of household filing status, your standard deduction for tax year 2020 is $12,400. This increases to $18,650 if you qualify for head of household—a big difference. 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.
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. Three of them provide that 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.
The pivotal day here is Dec. 31. If you're married on the last day of the year and living with your spouse, you're considered married for tax purposes for that year.
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.
You can elect to file one tax return jointly with your spouse if you're married. A joint tax return combines the incomes and deductions of both of you. Both you and your spouse must agree to file a joint return, and you both must both sign it.
Married filing jointly (MFJ) provides several more tax benefits than filing separately, 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. If it turns out that you owe $8,000 in taxes on your combined incomes, the IRS can collect the full amount from you even if you only earned 10% of that income and your spouse was the primary breadwinner.
You and your spouse can also file separate tax returns if you're married, but married filing separately (MFS) taxpayers have the least beneficial tax treatment. MFS status is nonetheless the one way to achieve separate tax liabilities, a benefit not to be overlooked.
Reasons why a married couple might want to file separately include:
- 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 if you file separately. You must coordinate who gets to claim your children as dependents if you have any. Spouses filing separately must both take the standard deduction or must both itemize their deductions.
Those 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, and the child tax credit and child and dependent care credit are negatively affected as well.
While filing jointly can in some cases result in lower federal tax, filing separately creates separate tax liabilities for each spouse, which can be useful in minimizing tax risks.
The single filing 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 filing status is essentially a catch-all basket for those who don't qualify for one of the other four statuses.
You might be eligible for the head of household (HOH) filing status if you're unmarried or considered unmarried and have been taking care of a dependent who lives with you for more than six months.
You are considered not married for tax purposes for that year if you're not married on the last day of the year, but there are special situations where married persons can be "considered unmarried" for purposes of qualifying for the Head of Household status even if they are not legally divorced or separated.
Single taxpayers who can claim a dependent may be eligible for the head of household filing status if they pay more than half the cost of maintaining their residence during the tax year. If they're "considered" unmarried rather than being single due to divorce, separation order, or the death of their spouse, their dependent must be a child.
The IRS will consider 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.
The criteria are strict, 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. But 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 person for a tax year if your spouse died during that year, even if you don't have a dependent. If you're still unmarried and have a dependent child after the initial year of death, you can then file under the qualifying widow(er) (QW) filing status.
This filing 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 QW filing status for a total of two years. If you are still unmarried after those two years, your filing status changes to single or head of household.
You must have at least one child as a dependent to qualify for this filing status. You cannot file as qualifying widow(er) if you remarry.
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 allows you to plug in some information and it 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 it only applies to U.S. citizens and resident aliens. It takes about five minutes.
Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2020," Accessed Dec. 10, 2019.
Tax Foundation. "2020 Tax Brackets," Accessed Dec. 10, 2019.
Internal Revenue Service. "Choosing the Correct Filing Status," Accessed Dec. 10, 2019.
Internal Revenue Service. "Publication 501 (2018), Dependents, Standard Deduction, and Filing Statuses," Accessed Dec. 11, 2019.