How to Choose The Right Filing Status When Filing Your Taxes
November 29, 2023
Filing status is a classification imposed by the IRS, and it is instrumental in determining a taxpayer’s income tax rates and filing tax returns.
Knowing your filing status is a must if you want to ensure the correct amount of tax is withheld from your salary. More importantly, your filing status helps you assess your eligibility for certain types of tax deductions.
Keep reading to learn the definition of filing status and everything else you need to know about it—from checking which category you belong to to understanding how it influences your tax obligations.
- The five different types of filing status options set by the IRS are single, head of household, married filing jointly, married filing separately, and qualified widow/widower.
- A taxpayer’s filing status aids in determining their correct tax bracket and eligibility for certain tax deductions.
- Use Form W-2 and Form W-4 when updating your filing status to ensure the change in information reflects on your taxable income and tax returns.
What is the Filing Status on a Tax Return Form?
Filing status is a category that helps determine the amount of income tax imposed on a taxpayer’s earnings.
There are five different types of filing statuses, namely:
- Head of the household
- Married, filing separately
- Married, filing jointly
- Qualifying widow or widower with a dependent child
Your filing status is closely tied to your tax bracket. A tax bracket is a category that groups together taxpayers based on their income level and consequently helps assess the percentage of taxes that they owe.
That said, your filing status combined with your specific tax bracket not only reflects how much tax you have to pay regularly but it also enables the IRS to evaluate your eligibility for specific deductions and tax credits.
Filing Status vs Marital Status
The main difference between your filing status vs. your marital status is that the former, although closely related to your marital status, is an umbrella term that informs the IRS of the correct tax rates to levy on your income.
For instance, if you are married, you and your spouse can choose to file taxes jointly or separately. Filing jointly or separately as a married taxpayer will yield different advantages, tax rates, and deductions depending on your tax situation.
Meanwhile, your marital status describes the official status of your relationship. You can either be married, separated, divorced, widowed, or even single.
Your relationship status alone does not affect or influence your taxes—that is unless you update your filing status with the correct marital status using your Form W-4.
How the Filing Status Works
It is crucial to know how each filing status works and how it differs from the others. After all, each type of filing status has specific rules on who is qualified to fall into that category.
To help you understand better, here is an in-depth guide to how each filing status works:
#1. Head of The Household
The head of the household is used by single people (or couples who are not legally married) who pay for at least half of the total household expenses, including utilities, rent, maintenance, home insurance, and all costs, coupled with providing support to qualifying dependents.
A qualifying dependent may be a relative, like a sibling or a child. As for age, qualifying individuals are generally children below 19 or students not older than 24.
Filing taxes under the head of the household category merits a standard deduction in taxes worth $20,800 and a classification under the 12% tax bracket for those earning $50,000 in taxable income.
#2. Qualified Widow/Widower With Dependent Child
The filing status used when a spouse dies is called qualified widow/widower with dependent child. It is reserved for taxpayers who recently lost their spouse and is also providing support to a child living in their home.
Unfortunately, if the qualifying child no longer lives within the same household at the time of the spouse’s death, then using the qualified widow/widower filing status may not be an ideal choice.
At the same time, a qualified widow or widower must also be paying over half of the household and property maintenance expenses.
If the spouse died within the tax year and the widow/widower has not had the opportunity to update their filing status, they may continue filing jointly for the entire year.
After that, the surviving spouse may use the qualified widow/widower status for the next two years following their spouse’s demise.
The IRS allows taxpayers in this category to file their taxes with the same regulations as married taxpayers who are filing jointly. For the 2023 tax year, the standard deduction for a qualified widow/widower is $27,700.
#3. Married, Filing Jointly
There are two IRS filing status options for married couples. The first one is called married filing jointly, which involves couples combining their taxable income and using the same W-2 forms to deduct their combined tax credits and deductions.
Filing jointly is also allowed, even if one spouse is not qualified for tax deductions or did not earn any income. On the other hand, the IRS considers a taxpayer who has been legally divorced by the end of the year unmarried and prohibits them from using the married filing jointly status.
The standard deduction for married couples filing jointly is $27,700.
Keep in mind that filing jointly also holds both couples accountable for their taxes, including any corresponding penalties for missing tax deadlines or paying insufficient taxes.
Filing jointly also yields lower tax amounts and higher deductions, especially if the couple itemizes all possible and applicable tax write-offs.
#4. Married, Filing Separately
The second filing status used by married couples is called married, filing separately, and it is used under more specific circumstances.
These circumstances include a spouse burdened with tax liabilities and marriage partners who suspect that their spouse may or may not be withholding information about their income. High-earning married couples also sometimes file taxes separately.
The standard deduction for married couples filing separately is $13,850.
Filing separately as a married couple is tricky. Aside from leaving taxpayers with higher taxes, it also limits the possible tax credits they can claim.
Examples of tax credits that married couples filing separately cannot deduct include:
- American opportunity tax credit
- Earned income tax credit
- Lifetime learning credit
- Student loan interests
Filing taxes separately as a married couple also means limiting tax deductions on child tax credit and retirement savings contributions by half. For capital losses, taxpayers filing under this category may only deduct up to $1,500.
Furthermore, married taxpayers filing separately who live in community property states may end up relinquishing their qualifications for other credits and deductions that they would otherwise enjoy had they filed their taxes jointly.
The single filing status applies to unmarried individuals who are not eligible to file under any of the other four categories set by the IRS. One of the advantages of this filing status for taxes is that it comes with significantly lower tax percentages, especially for high-income earners.
Single taxpayers qualify for a standard deduction worth $13,850.
The Importance of Selecting The Right Filing Status
Selecting the right filing status is key if you want a smooth-sailing process for filing your tax returns, claiming refunds, and deducting applicable tax credits.
Filing your taxes using the incorrect filing status may result in you getting penalized by the IRS.
You may also end up paying more taxes than you should, which is a big loss on your part since you could have saved the amount you paid for a rainy day.
For instance, if you are a divorced parent, you may find it more beneficial to update your filing status to the head of the household since it offers a broader range of tax brackets and eligibility for more tax write-offs compared to a single filing status.
Here’s a friendly tip to help reduce your tax filing errors: Use online tools in the form of a W-2 generator or a W-4 form generator to limit mistakes in enumerating all the essential information related to your income, taxes owed, and qualifying dependents.
Credible online tax form generators use templates that ensure you input accurate information and let you prepare the tax form you need fast.
Don’t take your filing status for granted, and make sure that you file your taxes in the correct category.
Not only will using the correct filing status prevent you from overpaying or underpaying your taxes, but it also leaves you with additional perks and deductions depending on which classification and tax bracket you belong to.