For an unmarried taxpayer, filing Head of Household (HOH) can have substantial financial benefits over filing as a single status taxpayer. In filing as Head of Household, one enjoys lower tax rates and a larger Standard Deduction. So if you are unmarried at the end of the tax year, you may consider filing your taxes using the favorable Head of Household (HOH) filing status, if two basic conditions are met.
(a) You paid more than half the costs of keeping up a home for the tax year
In determining whether you qualify for this condition, you must have incurred costs such as home mortgage interest, real estate tax, home insurance, repairs, utilities, and food. You cannot include amounts you paid for clothing, education, medical treatment, vacations, life insurance, transportation, or the rental value of your home. In determining the amount you paid in keeping up the house, you must exclude any payments received from public assistance.
(b) A qualified person lived with you for more than half of the tax year.
A qualifying person includes any of the following:
• An unmarried child, including your own child, grandchild, stepchild, or foster child. The child does not necessarily have to be a dependent on your tax return, but must have lived with you.
• A married child, including your own child, grandchild, stepchild, or foster child. The married child, however, MUST be a dependent on your tax return.
• Any other relative who is a dependent on your tax return, such as your parent, grandparent, brother, sister, stepbrother, stepsister, half-brother or half-sister, niece or nephew.
There is one important exception to the rule that your dependent must live with you for you to qualify for the Head of Household filing status. You can file as Head of Household even if your parent does not physically live with you, as long as you paid more than half the cost of keeping up a home that was the parent’s main home for the entire year. For example, if your parent is living in a rest home or home for the elderly, you can still qualify for the HOH filing status.
Another exception to the rule is where one or both of you have to be temporarily absent from the home for prolonged periods during the year, due to special circumstances such as illness, education, business, vacation, or military service. Under tax law, you and your qualifying person are still considered to live together under these circumstances, and you still qualify to use the HOH filing status.
Another interesting fact with the HOH filing status concerns the eligibility for a married person to actually file HOH. The general rule is that married folks, who decide not to file a joint return together, must file Married Filing Separately (MFS). However, if you are married and separated from your spouse, you may be “considered unmarried” for tax purposes if certain conditions are met. This means that you could qualify to file HOH instead of MFS, and will not be subject to the disadvantages of the MFS filing status.
Under tax law, you can be “considered unmarried” if you meet ALL the following tests:
• You must file a separate return from your spouse.
• You must have paid more than half the costs of keeping up a home for the tax year.
• You must not have lived with your spouse at any time during the last 6 months of the tax year.
• Your home was the main home for your child, stepchild, or eligible foster child for more than half of the year.
• You must be able to claim an exemption for the child. You still meet this test if the child was not claimed on your tax return, because you allowed the non-custodial parent to claim the exemption for the child.
It is very important to understand that you and your spouse must live apart in separate places, to qualify for this benefit; living in the same house under “emotional estrangement” does not qualify as living apart for HOH purposes.
Under tax law, a person who lived with you as a member of your household for the entire year can qualify to be your qualifying relative, even though no blood or marriage relationship exists. Note, however, that such an individual CANNOT qualify you for the HOH filing status. For example: a live-in boyfriend or girlfriend, or boyfriend’s or girlfriend’s child cannot qualify you for HOH. Neither does a cousin living with you qualify you for HOH.