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Older couple doing their tax returnsFiling taxes may not be your favorite chore, but it’s a necessary one to ensure that you stay in the good graces of the IRS. Deciding which tax filing status to choose matters for determining which tax breaks you might be eligible for and ensuring that you’re paying the right amount in taxes. There are five tax filing status options to choose from but picking the appropriate one isn’t always clear cut. If you’re filing taxes for the first time or you think your filing status may be different this year because of a life change, here’s what you need to know.

Tax Filing Status Explained

Your tax filing status is what helps the IRS determine at which rate your income is taxed. Taxpayers are assigned to different tax brackets, based on their filing status and household income. Your filing status can also determine which tax credits and deductions you may be eligible to claim.

Making sure you choose the right filing status is important so you won’t pay more in taxes than necessary. If you pick the wrong filing status, for example, it’s possible that you could disqualify yourself from claiming a key tax credit or deduction. Credits reduce your tax liability dollar for dollar and deductions reduce your taxable income, both of which can be helpful for minimizing your overall tax bill.

Aside from that, your tax filing status can also influence which tax forms you need to complete. Filling out the wrong tax forms or missing a key form altogether could result in incorrect reporting of your income. And that could cause you to owe more in taxes than you actually do or miss out on a bigger refund.

Tax Filing Status Options

The IRS offers taxpayers five different filing statuses to choose from. The options are:

  • Single
  • Head of household
  • Married filing jointly
  • Married filing separately
  • Qualified widow or widower

Single

Single filing status usually applies when you’re unmarried and aren’t eligible to use any other tax filing status. The IRS also allows you to file single if you’re legally separated from your spouse under a divorce or separate maintenance decree and you don’t qualify for another filing status.

Filing single means you qualify for the lowest standard deduction. But if you’re a higher income-earner, you may come out better from a tax bracket perspective compared to married couples who file a joint return.

Head of household

Head of household status assumes that you’re providing financial support for yourself and one other person, which could be a qualifying dependent child or dependent parent. You can claim head of household as an unmarried person or a married person if you’re separated from your spouse.

Either way, you must have paid more than half the cost of keeping up a home for the year. And your qualifying person must have lived with you for more than half the year if they’re under 19 or under 24 and a student. Dependent parents don’t have to live with you to qualify.

Filing head of household can help you snag a larger standard deduction. It could also potentially put you in a more favorable tax bracket versus filing single, depending on your income.

Married filing jointly

Married filing jointly means that you and your spouse report your individual incomes on the same tax return. Your income, tax credits and tax deductions are combined.

That also means you get double the standard deduction amount. And when claiming certain tax breaks, such as gift tax exclusions, amounts are doubled as well. The downside is that filing jointly can trigger the marriage penalty, wherein you may pay a higher tax rate by combining your income than you would if you filed separate returns.

Married filing separately

If you’re married and one of you earns significantly more money than the other, you might decide to file separate returns. This tax filing status applies when you decide that you’d prefer to file separately for any reason.

Filing separate returns could help lower your overall tax liability. But it can also affect key aspects of your tax filing, including your standard deduction amount and your eligibility to claim certain tax credits and deductions.

Qualified widow or widower

Filing taxes as a qualified widow or widower is something you can do in the first two years following a spouse’s death. This tax filing status is essentially the equivalent of married filing jointly in terms of the standard deduction amounts and thresholds for credits and deductions.

The catch is that you have to have a dependent child living with you to be eligible for this filing status. If your children are grown, then you may not be able to file as a qualified widow or widower.

How to Choose a Tax Filing Status

IRS building

If you’re unsure of which tax filing status may be right for you, the IRS offers a helpful tool you can use to narrow it down. But you may be able to figure it out yourself by asking the right questions. For example, start with your marital status. If you’re unmarried you could file single or head of household if you have dependents. If you have no dependents then you’ll most likely file single.

When you’re married, consider your living situation. For example, if you live with your spouse you could file jointly or separately. But if you’re separated from your spouse, you may be able to file head of household if you have a qualifying dependent and provide more than half of your household’s financial support.

Deciding whether to file jointly or separately may depend on how much each of you earns. Doing the math on how much you may owe (or get back in a refund) by filing jointly versus filing separately can help you decide which one makes the most sense financially.

And if you’ve recently lost a spouse, you may consider qualified widow or widower status first. But if you don’t have a dependent child, you’d most likely need to file your return as a single person.

The Bottom Line

Husband and wife prepare their tax returnsYour tax filing status is an important part of the puzzle when preparing your return and paying taxes. If you’re unsure of which status to choose, talking to a professional tax preparer or accountant may help. And remember that your tax filing status can change from one year to the next if you experience any significant life changes, such as getting married or divorced, having a child or losing a spouse.

Tips for Investing

  • Consider talking to your financial advisor about how to best manage your tax liability where your investments are concerned. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool can help you connect with professional advisors in your local area in minutes. If you’re ready, get started now.
  • One important thing to keep in mind about your tax filing status is how it can affect your ability to take advantage of a traditional or Roth IRA. With a traditional IRA, whether or not you can deduct your full contributions each year depends on your filing status, income and whether you and your spouse are covered by a retirement plan at work. With Roth IRAs, your ability to contribute to one of these accounts is based on your filing status and household income.

Photo credit: ©iStock.com/AJ_Watt, ©iStock.com/Pgiam, ©iStock.com/Neustockimages

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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