Head of Household: Qualifications, Tax Brackets and Deductions

When tax season approaches, you're likely looking for help wherever you can. Even just your filing status can have a dramatic impact on what you owe, what bracket you're in, and what deductions you could be eligible for.

The status with the most specific and stringent qualifications is "head of household." Single people file if they're unmarried with no dependents. Married people can file jointly or separately with their own finances. But what makes someone head of the household in the eyes of the government?

What is Head of Household Status?

Head of household is one of several statuses a party can claim when filing for taxes, according to the U.S. Internal Revenue Service (IRS). The head of household is not married, but unlike someone filing their taxes as a single person, they have a dependent. They must be paying for more than half of household expenses to qualify. Should they qualify, they can get unique deductions and wider tax brackets.

On its face, this sounds simple, but there is a lot of grey area regarding what qualifies as head of household. Your relative doesn't qualify as a dependent just because they're a relative.

A lot of these qualifications are pretty vague. What does it mean to be "unmarried"? What exactly are "household expenses"? Understand the nuance of what it means to qualify before talking to your accountant or trying to file as head of household.

When Are You Considered 'Unmarried?'

Well if you've never been married, you're considered unmarried. You did it!

The nuances comes when you are recently divorced or separated from your spouse. At what point do you become an unmarried person in the eyes of the IRS?

Your status as an unmarried person is determined on the final day of the tax year. You'll need to be divorced or separated by then. If still technically married, you can count as unmarried if you lived in your home separately from your spouse for at least the last six months of the tax year. Don't try to use this as a work-around if you plan on staying married, though: your spouse is still considered as living with you if they're out of the house that time for work, school, vacation or military service.

In being considered unmarried, you will have to file separately from your spouse even if still legally married, though this alone won't get you head of household status.

What Household Expenses Qualify?

Head of household must be paying for at least half of household expenses in order to qualify. Take stock of the major expenses for your household and start doing some math if you're not certain whether you fall under this umbrella.

Your monthly rent or mortgage payments certainly count, as does any interest expense on the mortgage. How much of the utilities did you pay over the year? How much did it cost for house maintenance, and how much of that cost did you pay? What about property taxes and property insurance? Even groceries count toward your household expenses. Calculate how much of that came out of your pocket, and if it was more than half you can qualify. The IRS has a worksheet in Publication 501 to help.

But not every expense counts as a household expense. For example, don't factor medical expenses, clothing, transportation or life insurance into your household expenses.

Who is a Qualified Dependent?

You must have a dependent to qualify for head of household status, but not every dependent allows you to qualify.

Biological children, stepchildren, adopted children, foster children, grandchildren, siblings, stepsiblings, and half-siblings can all fall under the umbrella of children that are qualified dependents. They'll also need to be younger than you, unless they have a permanent total disability. They are also qualified if they are 19 or younger at the end of the tax year, or 24 and under if they are a student. They must have lived with you for more than half of the year, provided less than half of their own financial support that year, and are unable to file a joint return that year.

In addition, if your child is married and you are eligible for an exemption for them, you could also qualify.

What about qualified relatives who aren't children? Your children may be considered a qualified relative if they aren't a qualifying child. A non-student over the age of 19 or your child over 24 can still qualify if other standards are met. Other relatives, from siblings to parents to grandparents, can be a qualified relatives as well, and some aren't even required to live with you.

For them to be a qualified relative, you need to provide more than half of their support per what the IRS considers support, and as of 2017 their gross income cannot exceed $4,050.

If a parent is a dependent, he or she may be a qualified relative regardless of whether they live with you - if you can get an exemption and if you pay more than half the cost of upkeep on their place of residence.

Tax Brackets for Head of Household

One of the biggest perks for those who qualify for head of household status is that you get a significant change in the first couple of tax brackets.

Someone filing as a single person after 2018 in the lowest tax bracket would be taxed 10% on income of $0-$9,525. But if you've qualified for head of household, the income is $0-$13,600.

The second bracket, which gets taxed 12%, goes up to $51,800 for head of household. In doing this, those with dependents are rewarded with lower taxes than someone without a dependent. A single person making $60,000 a year would pay $9,139.50 in taxes in a given year. A head of household on that salary would pay $7,748.

Here are all the most up-to-date federal tax brackets for head of household:

 

Head of Household Deductions and Exemptions

In addition to lower tax rates, those with head of household status get a higher standard deduction. If you're single or a married person filing separately, for 2018 your standard deduction is $12,000. The standard deduction for the head of household is $18,000.

Standard deductions are higher for those over 65, or are blind, or both.

Because being head of household requires having qualifying dependents, there may be additional exemptions. However, you and your qualifying children or relatives will have to pass a couple of other tests to ensure your exemption. One is the Dependent Taxpayer Test. If you are claimed as a dependent on someone else's tax return, you can't claim any dependents.

So let's say you haven't been claimed as a dependent. The qualifying child or relative has to pass the Joint Return Test: if your dependent is married and files a joint return with their spouse, you generally cannot claim them as a dependent.

The final test is the Citizen/Resident Test. Someone can only be claimed as a dependent if they are a U.S. citizen, U.S. National (born in American Samoa or Swains Island), U.S. resident alien or a citizen of Canada and Mexico. The exception to this rule is an adopted child who has lived with you the entire year.

Should all these tests be passed, and your children or relatives qualify under the other rules, you should be able to get exemptions for them.

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