Are you confused about your tax filing status? Do the various options available seem daunting? Fear not, as we are here to demystify the complex world of tax filing. The information in this blog post will help you determine what status you should pick, setting you up for financial success.
One of the most critical decisions that taxpayers must make is to choose the right filing status, as it influences the amount of tax owed, refund received, and eligibility for various deductions and credits. Here are the five types of filing statuses that the Internal Revenue Service (IRS) offers.
Single – If you are unmarried, divorced, or legally separated according to state law, you can use this filing status. It offers the fewest tax breaks, and you must earn at least $12,400 annually to file taxes.
Married Filing Jointly – This status offers the most tax benefits for married couples who file their taxes together. Both spouses share the responsibility for the tax liability on the joint return and must disclose all their sources of income.
Married Filing Separately – If you choose to file your taxes separately from your spouse, this status is for you. While it offers some relief from tax liability, it comes with significant restrictions on deductions and credits.
Head of Household – This status is for unmarried individuals who support a household is maintained for a qualifying person, such as children, elderly parents, or relatives. This status provides significant tax relief.
Qualifying Widow(er) – The year that your spouse dies, you should file a joint return and include all of your income and deductions for the full year (but only your spouse’s income and deductions until the date of death). For the next two years, if you didn’t remarry, if you have a qualifying dependent child or stepchild, you can file as a qualifying widow(er), which gets you a higher standard deduction and lower tax rate than filing as a single person.