Being an adult is great. You get to be king or queen of your own castle — or head of the household, if you will.
It’s all fun and games until tax time rolls around, and then “head of the household” takes on an entirely different meaning. Shudder.
Filing your taxes as head of household can seem vaguely intimidating, but it’s really nothing more than a designation by the IRS that may lower your tax bill and put more money in your pocket.
See? It’s not so scary after all.
What the Heck is Head of Household?
Head of household is a filing status the IRS uses to determine what tax bracket, credits and responsibilities apply to you during the course of a tax year.
To qualify as head of household, you’ll need to meet certain criteria.
1. You’re not married on the last day of the year. Interestingly, you can be married the first 364 days of the year, but if you’re not legally married on Dec. 31, the IRS considers you unmarried for the entire year.
Don’t get any ideas about divorcing your spouse for a few days around the end of December just to file as head of household. If you turn around and get remarried any time during the following year, you’ll face tax consequences from the IRS.
The IRS also considers you unmarried for tax purposes if your home state has declared you legally separated from your spouse. Simply moving out of your shared home isn’t enough; you need to get in front of a judge to be granted a legal separation.
A court-decreed annulment also qualifies you as unmarried for tax purposes. You’ll need to fill out some extra paperwork, though, so be sure to check with the IRS or a professional tax preparer to find out exactly what you need to do.
2. You paid more than half the expenses for keeping up the home during the year. That means you must have paid more than half of all household bills, including rent or mortgage, groceries, utilities and insurance.
It’s OK if someone gave you money during the year to help you cover the bills as long as you paid more than 50% of them with your own savings or money you earned.
3. You must have a dependent living in the home with you for at least half the year. Qualifying dependents include biological, step-, foster and adopted children, and your siblings. They must be under 19 if they are not a student, or under 24 if they are a full-time student. There is no age cap if the dependent child is permanently and totally disabled.
You can also claim parents, stepparents, grandparents and certain individuals who are related to you by marriage as dependents. The key is they must have lived with you for at least half the year, and you must have paid more than half of their financial support.
Check the IRS website for a full list of qualifying dependants.
Should I File My Taxes as Head of Household?
Most tax professionals advise taxpayers to file as head of household whenever possible to take advantage of available tax breaks that include:
- Larger standard deductions. People filing under a single or married filing separately status are entitled to a $6,300 deduction for the 2016 tax year. That figure jumps to $9,300 if you file as head of household.
- Lower tax rate. Filing as head of household puts you in a different tax bracket than other filing statuses. That could mean you have less taxable income and lead to a lower tax bill or a larger tax refund.
If you need help figuring out whether you qualify to file as head of household, try this interactive quiz on the IRS website to find out.
Your Turn: Did you get a bigger refund or better tax breaks by filing head of household?
Lisa McGreevy is a staff writer at The Penny Hoarder. She likes bringing you this information, but she is not a tax preparer, and this is not legal tax advice.
The post Taxes Are Confusing. What Does Head of Household Mean? appeared first on The Penny Hoarder.
source The Penny Hoarder http://ift.tt/2lztVBk
ليست هناك تعليقات:
إرسال تعليق