It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter.
H is for Head of Household.
I know what you’re thinking: Head of Household is an easy one. That’s because we’re so used to seeing it: one of the first pieces of information you share with the Internal Revenue Service (IRS) is your filing status. Your filing status impacts your tax rates, your qualification for certain tax deductions and credits, and more.
You can choose from one of five filing statuses on a federal tax return:
- Married Filing Jointly;
- Married Filing Separately;
- Head of Household; and
- Qualifying Widow(er) With Dependent Child.
Maybe not. One of the things that I have realized this filing season – largely due to the scramble to understand how to qualify for stimulus checks – is that there are many misconceptions about filing status. And Head of Household is at the top of the list.
So, first, the basics. For federal income tax status, marital status is determined by state law as of the last day of the calendar year. If you are married on December 31, you are considered married for the year (married filing jointly or married filing separately). If you’re not married on December 31 because you were never legally married or you were legally separated or divorced according to the laws of your state, you are not married (single, head of household, or qualifying widow(er) with dependent child). It typically doesn’t matter what happens in between.
Most of those filing status options are pretty straightforward. But head of household can be tricky. You can file as head of household IF:
- You are unmarried or considered unmarried on the last day of the year; AND
- You paid more than half the cost of keeping up a home for the year; AND
- A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the qualifying person is your dependent parent, he or she doesn’t have to live with you.
To figure that you, you need some further definitions.
First, you are considered unmarried on the last day of the year if:
- You file a separate tax return; AND
- You paid more than half the cost of keeping up your home for the tax year; AND
- Your spouse didn’t live in your home during the last six months of the tax year (your spouse is considered to have lived in your home even if he or she is temporarily absent due to special circumstances like illness, school or military service); AND
- Your home was the main home of your child, stepchild, or foster child for more than half the year; AND
- You must be able to claim that child as a dependent (unless you qualify for an exception).
And, a qualifying person is:
- A qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) who is either single or is married, but you can claim as a dependent; or
- A qualifying relative who is your father or mother who you can claim as a dependent; or
- A qualifying relative other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) who lived with you more than half the year, and you can claim as a dependent. This may include your child, stepchild, grandchild or other descendant of one of your children (or stepchildren or foster children), son-in-law, daughter-in-law, brother, sister, half brother, half-sister, stepbrother, stepsister, brother-in-law, sister-in-law, parent, stepfather, stepmother, father-in-law, mother-in-law, grandparent, great-grandparent, and, if related by blood, aunt, uncle, niece, or nephew.
For purposes of a qualifying person, the IRS even drew up a table for you. It’s the infamous Table 4 that you’ll see referenced over and over in head of household conversations:
You can view Table 4 in full-size by checking out IRS Pub 501, Dependents, Standard Deduction, and Filing
Information (downloads as a PDF).
But here’s the bit that you need to take away. According to Pub 501, “Any person not described in Table 4 isn’t a qualifying person.”
That seems pretty simple, but many family situations are not terribly simple. So let’s run through some examples that folks are often confused about.
First, spouses. Your spouse is not your dependent. And you must have a qualifying dependent to file as head of household status. So, if you are married without any other dependents, you may not claim head of household status (you would typically opt for married filing jointly). And if you are married but not considered unmarried (yes, I see those double negatives), you typically cannot claim head of household status even if you support other relatives.
What about your significant other? Your significant other may, under some circumstances, qualify as your dependent. However, your significant other is not a qualifying person under the head of household rules because he or she is not related to you.
What about your significant other’s child? Same result. You may be able to claim the child as a dependent, but the child is not a qualifying person for purposes of head of household status because the child is not actually related to you.
What about your own child if you live with your significant other? Finally, a yes. You can file as head of household if you have a qualifying child (or other qualifying person) who lives with you and your significant other so long as the child meets the other criteria.
After re-reading many of your emails, I think the confusion boils down to this one thing: a dependent is not always a qualifying person for purposes of head of household. You have to run through all of the tests.
I know that some of you may have your finger on the email button, ready to send me emails to the contrary. That may be because some websites do claim that your significant other or significant other’s child is a qualifying person for purposes of head of household. But that’s not correct. The IRS confirms as much in Pub 501 (the link is above at the chart), with the following examples:
Example 3. Your girlfriend lived with you all year. Even though she may be your qualifying relative if the gross income and support tests (explained later) are met, she isn’t your qualifying person for head of household purposes because she isn’t related to you in one of the ways listed under Relatives who don’t have to live with you .
Example 4. The facts are the same as in Example 3 except your girlfriend’s 10-year-old son also lived with you all year. He isn’t your qualifying child and, because he is your girlfriend’s qualifying child, he isn’t your qualifying relative (see Not a Qualifying Child Test , later). As a result, he isn’t your qualifying person for head of household purposes.
It’s confusing – so much so that the IRS requires preparers to complete a form confirming that they’ve performed due diligence for head of household filing status. It’s Form 8867, Paid Preparer’s Due Diligence Checklist (downloads as a PDF). The penalty per failure to be diligent is $530 for returns or claims for refund filed in 2020.
If you’re still not sure whether you qualify as head of household, you may want to try the IRS’ interactive filing status tool. You can find it here.
You can find the rest of the series here:
- A is for ATIN
- B is for BEAT Regs
- C is for Cryptocurrency Reporting
- D is for De Minimis
- E is for Extended Due Dates
- F is for FTE
- G is for GILTI
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