Head of Household

What is the Head of Household?

The head of household is a tax filing status for individuals. It is majorly used in the United States of America. A taxpayer can qualify for this position only if he or she is either single or unmarried at the end of the year and has proof of maintaining a home for a person such parents, a child or other close relatives.

The benefits of filing as head of household are that individuals get a larger standard Deduction and a wide tax bracket for calculating Income Taxes as compared to single filing status. Taxpayers will have to follow the Internal Revenue Service (IRS) guidelines to stay away from investigations or tax audits for non-compliance.

Important Points for Filing as Head of Household

1. Household Maintenance

According to the U.S. Internal Revenue Service, a taxpayer should have paid more than half of the expenses in maintaining a home. These expenses should include utility bills, groceries, mortgage, rent, property taxes and repairs. Note that these expenses do not include clothing, healthcare, Life Insurance, vacations, education and transportation.

2. Unmarried

A taxpayer will qualify as head of household if he or she was considered unmarried as of the last of the year. The requirement to qualify as head of the household is that the taxpayer is single, divorced or legally separated.

3. Qualifying Child or Relative

A qualifying child or relative should be living in the taxpayer’s home for more than 6 months. The taxpayer should have proof that he or she is providing at least 50% of the maintenance cost for the dependent.

Benefits of Head of Household

1. Tax Bracket

Filing as the head of the household attracts a lower tax bracket. For instance, if a household is earning $40,000 annually a 15% tax bracket is applied. However, if an individual qualifies as head of household, the 15% tax bracket will be applied for income up to $50,800.

2. Standard Deductions

Filing as head of the household attracts higher standard deductions. Standard deductions reduce the Taxable Income annually which lowers the amount of taxes due.