Basically, when it comes to filing your personal tax return, there are five filing statuses you may choose from: single, head of household, married filing separately, married filing jointly, or qualifying widow with dependent child. Filing incorrectly can cost you a bundle in tax dollars as well as have other ramifications.
Single
This status is fairly simple to explain. “Single” applies to you if you have never been married or if you were legally separated or divorced prior to the last day of the year you are filing for. Therefore, if you became legally divorced from your spouse on December 30th of last year, you would qualify for “single” status for that tax year. You would also qualify for “single” status if you became a widow prior to the first day of the year, did not remarry, and did not have a qualifying child. However, if you became widowed during the tax year (after the first day of the year), you would file “married filing jointly”.
Head of household
This is a special status established for unmarried individuals, who would otherwise qualify as “single” status, that provide over half of the support for another person. The additional person did not necessarily have to live with you, depending on their relationship with you, but you have to have paid half of their cost of living. This is designed to provide additional tax benefit than is available under “single” status.
Married filing separately
This is by far the least desirable filing status available. “Married filing separately” is for individuals that are legally married on the last day of the tax year, even if you were living separately from your spouse. However, filing under this status bars you from claiming various deductions and credits; therefore, this status should only be used if there are specific advantages for doing so.
Married filing jointly
“Married filing jointly” provides the most number of tax benefits along with “qualifying widow with dependent child”. This status is for individuals that are legally married on the last day of the tax year, even if the spouses live apart or if one spouse dies after the end of the tax year; or if a spouse becomes a widow(er) during the tax year and did not remarry during the year. “Married filing jointly” allows you to claim a number of deductions that are not available if you and your spouse are filing separately.
Qualifying widow with dependent child
This status provides many of the same benefits as “married filing jointly” but is designed for people widowed prior to the first day of the tax year, did not remarry during the tax year, and have a qualifying dependent. However, if your spouse died during the tax year, you would qualify for “married filing jointly” status.
Why It Matters
Your filing status dictates the deductions and credits you qualify for as well as the dollar amount of the standard deduction you qualify for. For example, for the year of 2005, “single” and “married filing separately” statuses have a standard deduction of $5,000, while “head of household” is $7,300, and “married filing jointly” and “qualifying widow” are $10,000.
In addition to standard deductions, other deductions and credits are not available to certain filing statuses. For example, “married filing separately” may not claim the earned income credit, student loan interest deduction, tuition and fees deduction, or the education credits. Therefore, the filing status you choose may cost more than you are aware of.