MODULE 5: Filing status

Overview of Filing Statuses

• The choice of filing status has significant implications for a taxpayer's tax brackets and standard deduction.

Unmarried Taxpayers

• Single

  • Default filing status for unmarried taxpayers.

  • Generally has the lowest standard deduction and highest tax brackets, making it less financially favorable.

• Head of Household

  • For unmarried individuals or those considered unmarried (e.g., under abandoned spouse rules).

  • Must maintain a household for a qualifying person (a dependent).

Qualifying Person Requirements for Head of Household

• A qualifying person must meet specific criteria:

  • They must be a dependent of the taxpayer (either a qualifying child or qualifying relative).

  • The dependent must be related to the taxpayer, not just a qualifying relative who only meets the relationship test by living with the taxpayer.

  • Must live with the taxpayer for more than half of the year or must be a parent of the taxpayer.

Example Scenario with Jason and Layla

• Jason: A single taxpayer with a dependent, Layla.

  • Layla is a qualifying relative because she lived with Jason, had zero income, and Jason provided all her support.

  • Layla does not qualify as a qualifying person for Jason to file as Head of Household since she is not related to him.

Identifying Other Dependents

• Maria: Jason’s mother, also a qualifying relative.

  • Maria did not live with Jason but was provided more than 50% support.

  • Since Maria is related to Jason, she qualifies as a qualifying person, allowing Jason to file as Head of Household.

Married Taxpayers

• Married couples have options of filing:

  • Jointly: Both report income and deductions on one tax return; generally the most financially beneficial option.

  • Separately: Each spouse reports their share separately; sometimes beneficial for specific tax situations (e.g., high medical expenses or income-driven student loan repayments).

Special Considerations

• If one spouse passes away during the tax year, the surviving spouse is considered married for that year.

Qualifying Widow/Widower Status

• Available for two years after a spouse's death if the surviving spouse has a dependent child.

• The surviving spouse can use this status for better tax rates and standard deductions.

Example Scenario with Mark and Mary

• Mark: Married to Mary until her death in 2024.

  • Mark can file as Married Filing Jointly or Separately in 2024 (the year Mary passed).

  • In 2025 and 2026, Mark can file as a Qualifying Widow/Widower with dependent child since he has a child named Matt.

  • In 2027, Mark becomes an unmarried individual and must choose between Single or Head of Household status, with the latter being possible due to Matt's dependency and residence.