Selecting a filing status is one of the first decisions you’ll make when you fill out your federal income tax return — and it can be a complicated one, especially because you may have more than one option.

It’s important to know the rules as well as the advantages and disadvantages of each, as making the right decision about your filing status can help save money now and help prevent potential problems with the IRS later.

The five filing statuses are:

  1. Single.
  2. Married filing jointly.
  3. Married filing separately.
  4. Head of household.
  5. Qualifying widow(er) with dependent child.

Although you’ll generally want to choose whichever filing status minimizes your taxes, other considerations (such as a pending divorce) may also come into play. Let’s take a look at each status a little more closely.

1. You’re single if you’re unmarried or legally separated from your spouse on the last day of the tax year.

This one’s pretty straightforward — and depending on your circumstances, it may be your only option. Your filing status is determined as of the last day of the tax year (Dec. 31). To use the single status, you must be unmarried or separated from your spouse by either divorce or a written separate maintenance court decree on the last day of the tax year.

2. Married filing jointly may result in tax savings for married couples.

You may file jointly if, on the last day of the tax year, you are:

  • Married and living together.
  • Married and living apart, but not legally separated under a divorce decree or separate maintenance agreement.
  • Separated under an “interlocutory” (i.e., not final) decree of divorce.

Also, you are considered married for the entire tax year for filing status purposes if your spouse died during the tax year.

When filing jointly, you and your spouse combine your income, exemptions, deductions, and credits. Filing jointly generally offers the most tax savings for married couples. For one thing, there are many credits that you can take if you file a joint return that you can’t take if you file married filing separately. These include:

  • The child and dependent care credit.
  • The adoption expense credit.
  • The American opportunity tax credit (AOTC), which you can use if you’re paying for college tuition.
  • The Lifetime Learning Credit, which you can use if you’re paying for other qualified education expenses.

Still, this filing status is not always the most advantageous. If your spouse owes certain debts (including defaulted student loans and unpaid child support), the IRS may divert any refund due on your joint tax return to the appropriate agency. To get your share of the refund, you’ll have to file an injured spouse claim. You can avoid this potential hassle by filing a separate return.

3. You don’t have to be separated to choose married filing separately.

You and your spouse can choose to file separately if you’re married as of the last day of the tax year. Here, you’d report only your own income and claim only your own deductions and credits. Filing separately may be wise if you want to be responsible only for your own tax. With a joint return, by comparison, each spouse is jointly and individually liable for the full amount of the tax due. So, if your spouse skips town, you’d be left holding the tax bag unless you qualified as an innocent spouse.

Filing separately might also be the best tax move if one spouse has significant medical expenses or miscellaneous itemized deductions.  Remember, though, that you won’t qualify for certain credits (such as the child and dependent care tax credit) and can’t take certain deductions if you file separately. For example, you can’t deduct qualified education loan interest if you’re married and file separately.

4. Head of household status offers certain income tax advantages.

Those who qualify for the head of household filing status are usually eligible for a number of tax breaks. However, you’ll have to satisfy the following requirements:

  1. Generally, you should be unmarried at the end of the year (unless you live apart from your spouse for the entire last half of the year and meet certain requirements related to your living situation).
  2. You must maintain a household for your child, dependent parent, or other qualifying dependent relative.
  3. The household must be your home and generally must also be the main home of a qualifying relative for more than half of the year.
  4. You must provide more than half the cost of maintaining the household.
  5. You must be a U.S. citizen or resident alien for the entire tax year.

5. Qualifying widow(er) with dependent child offers the advantages of a joint return.

You may be able to select the qualifying widow(er) with dependent child filing status if your spouse recently passed away. To qualify, you must meet all of the following requirements:

  1. Your spouse died either last tax year or the tax year before that.
  2. You qualified to file a joint return with your spouse for the year he or she died.
  3. You have not remarried before the end of the tax year.
  4. You have a qualifying dependent child.
  5. You provide over half the cost of keeping up a home for yourself and your qualifying child.

Choosing the correct filing status isn’t necessarily easy, but understanding your options is the first step in making the decision that’s best for your personal situation. If you’re confused or unsure of which filing status to use, it could be worthwhile to talk with a tax professional — after all, you work hard for your money and deserve to keep as much of it as possible.

Some information sourced from Broadridge Investor Communication Solutions, Inc.
The information provided is general in nature, is for informational purposes only, and should not be construed as legal or tax advice. Financial Engines does not provide legal or tax advice. Financial Engines cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Financial Engines makes no warranties with regard to such information or results obtained by its use. Financial Engines disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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