The Head of Household filing status is an advantageous option for single taxpayers or those who are legally separated or unmarried at the end of the tax year, as it can result in lower taxes and more favorable rates. This article will discuss what it means to be a Head of Household, the qualifications and eligibility requirements for the filing status, and the tax benefits associated with it.
Head of Household (HOH) is an IRS tax filing status available to eligible individuals who maintain a household and pay more than half the cost of keeping up a home for themselves and a qualifying person. An HOH filing status entitles the taxpayer to more beneficial tax rates and deductions than other single filing statuses.
In order to qualify for the Head of Household filing status, the individual must meet certain criteria. To qualify, the HOH must have been unmarried or considered unmarried by the IRS on the last day of the tax year, be responsible for more than half the costs related to their home, and have a qualifying dependent who lives with them in the home for more than half the year. Qualifying dependents include a child, stepchild, foster child, or other relation supported by the HOH.
The Head of Household filing status has several advantages. The HOH filing status is typically used because it allows the filer to get a lower tax rate and higher standard deduction than single or married filing separately. Other benefits include being able to claim the Earned Income Tax Credit and Child and Dependent Care Credit, both of which are generally only available to those who file as Head of Household.
Qualifying as a Head of Household comes with several requirements. First, the individual must pay more than half of the household expenses for the year in order to be considered a head of household. This includes rent or mortgage payments, utilities, food, clothing, and other necessary costs for maintaining the home. Additionally, the individual must have a qualifying dependent who lives in the same residence for more than half of the year. The dependent must be either a child, stepchild, or other ward of the householder, or an aged parent or grandparent who is living with the householder. Finally, the individual must fill out IRS form 1040 and claim "Head of Household" filing status on their tax return. If all three of these qualifications are met, the individual may qualify as a Head of Household for tax purposes.
Heads of Household receive some major tax benefits from the government. The primary benefit is a larger standard deduction than other taxpayers. This means that the taxable income amount is smaller, so the head of household pays less taxes overall. In addition to this deduction, heads of household can also claim certain tax credits that reduce the total tax burden even further. These credits can include the Earned Income Tax Credit and the Child Tax Credit, both of which can provide significant savings in taxes. Finally, depending on the state you live in, there may be additional credits or deductions available.