Just because you were on lockdown for most of 2020, doesn’t mean you didn’t have life-altering events. Whether you were able to sneak in a marriage, decided to end one, or took in some dependents, your tax filing status may have changed. And picking the right filing status can save you big bucks come tax time.
So here are a few things to remember:
- Your marital status on December 31 counts for the whole year.
- Married Filing Separate maybe be more beneficial, than Married Filing Joint, to a married couple with two high-income earners, says Lisa Greene-Lewis, TurboTax (NAS: INTU) expert and CPA. So consider running your tax return both ways – first as married filing joint, then as married filing separate, to see which is more advantageous.
- Head Household could be the better filing choice for single people with at least one dependent. And that dependent does not have to be a child, as most people presume. It could be a qualifying relative as well. So if you took in a parent or your great-aunt for an extended period of time, be sure to check out IRS Publication 501 – Dependents, Standard Deduction, and Filing Information to see if you qualify as Head of Household. The income tax rates are lower than the rates applied to singles. Plus, you may be able to qualify for more deductions, like the child tax credit or the dependent care credit.