Understanding Tax Terms: Head of Household
The term Head of Household is confusing for many taxpayers. However, if you qualify for Head of Household status, there are two big tax benefits: a higher standard deduction, as well as lower effective tax rates for virtually every income level.
Three key qualifications:
You are not married. Unmarried means single, divorced or legally separated per a court order. You can also be considered ‘unmarried’ if you are legally married, but you and your spouse are separated and lived in different residences for the last half of the year.
You pay half of the cost to keep up your home. The IRS provides a worksheet to help you calculate this. Here are examples of household expenses:
Include: Rent, mortgage interest, property taxes, homeowners insurance, repairs, utilities and food eaten in your home.
Don’t include: Clothing, education, medical expenses, vacations, life insurance and transportation.
There is a qualifying person living with you for at least half the year. Essentially, if you claim a dependent, you probably meet this requirement. If your dependent is a parent, you may be considered Head of Household even if that parent doesn't live with you, as long as you provide more than half the cost of keeping up their home.
Choosing the right filing status can make a huge difference on your tax return , but make sure you qualify before filing. If you have questions regarding your filing status, call 805-496-2828 to review your tax plan.
