Like most times when children are involved, regular tasks get more difficult, and adding children to the mix during tax season can throw a wrench in the already arduous process. If you’re not married, marking your filing status as “single” may seem like the right thing to do, but if you’re raising a child or caring for a parent — think again. You may score larger benefits filing as head of household. Whether you’re an entrepreneur, freelancer, or just an avid AG reader (hello again!), knowing this important tax tip could benefit you when filing this year.
For the 2021 tax year, the head of household standard deduction of $18,800, that is nearly 50% more than single filers whose standard deduction is $12,550, which means your taxable income is lower. Filing as head of household can also place you in a lower tax bracket, than if you filed as single.
Should you file as head of household? Here’s a quick checklist to check if you’re eligible:
- You are single or
- You are unmarried or living separately from your spouse starting before June 30, and
- You are paying more than 50% of your home costs (mortgage, rent, utilities, repairs, meals) and
- A dependent (child, grandchild, or another relative) is living with you for more than half of the year or living alone, but you pay the majority of their living costs.
If you have more than one child, both parents can file as head of household as long as one child lives with each parent for more than half the year. If there is only one child, tax experts say it may be best to alternate who claims head-of-household status each year.
If your child is older they can still be claimed as dependents, too. Parents can claim them if they live at home and are under 19-years-old. If the child is a full-time student, you can claim them on your taxes until they’re 24-years-old, but only if they earn less than $4,300 a year.
When the time comes to gather your W-2s and other tax documents to meet with Uncle Sam, think twice about what to file as and if you’re still unsure the IRS has a tool to help.