Home Business 5 Tips About Your Tax Filing Status

5 Tips About Your Tax Filing Status

298
0
5 Tips About Your Tax Filing Status

Every April, Americans face a stressful yet relieving day: Tax Day. Filing your taxes can be complicated — especially if you don’t know what tax filing status to use.

Luckily, you don’t have a ton of options. Whether this is your first or fiftieth time filing taxes, you should consider which status to use.

Keep reading to learn about the statuses and how to choose one.

1. Single Filing Status

The single tax filing status applies to anyone who is unmarried and isn’t a head of the household. Anyone who is not married on December 31 of the tax year can claim this status.

If you are married or have a common-law marriage, you have to file as a married couple. However, people in civil unions or domestic partnerships can file as single.

Single people can save money on taxes if they make a lot of money. Couples often hit higher tax brackets more quickly than individuals, so you can end up paying more if you get married.

The single filing status is useful for anyone who doesn’t qualify for other filing statuses. But if you are married, you’ll need to file as such on your taxes.

2. Married Filing Jointly

If you get married by the end of the year, you will need to file your taxes as a married couple. Filing jointly is a common option, especially for couples who qualify for tax credits and deductions.

When you file with your spouse, you can qualify for education tax credits, child and dependent care credits, and the earned income tax credit. You also have a higher standard deduction than single filers or couples filing separately.

Most married couples will probably file their taxes together. You can take advantage of a lot of savings on your taxes, and you and your spouse only have to file one return.

However, you don’t have to file your taxes jointly. Married couples can also file separately for other benefits.

3. Married Filing Separately

If you have a massive medical bill, you may want to file your taxes separately. That’s because you can deduct the amount of the bill over 7.5% of your income.

So, if you make $40,000 and have a $5,000 medical bill, that amounts to 12.5%. But if your spouse also makes $40,000, your total income would be $80,000.

As such, your $5,000 medical bill would be less than 7.5% of your combined income. In that case, filing separately would allow you to claim the medical bill deduction.

However, filing separately can disqualify you from other savings. Consider your biggest expenses and if they’re worth filing one way or the other.

4. Filing as a Head of Household 

If you’re unmarried but have dependents or family members in your home, you can file as a head of household. To qualify for this status, you have to pay for at least half of the expenses to support everyone in your home.

Your dependents also have to be your relatives, such as children, siblings, grandparents, or grandchildren. Married couples can’t take this tax filing status because of their married status.

But if you get divorced or live apart from your spouse, then you can qualify for head of household status. However, you have to meet all of the requirements to qualify.

So, if you only cover 45% of your household’s costs, you wouldn’t be able to take this status. If you do qualify, you can take a larger standard deduction, but you should make sure you qualify so that you don’t run into problems with an audit.

5. Filing as a Qualified Widow/Widower

You can file as a qualified widow or widower for two years after your spouse’s death. To claim this status, you have to have been eligible to file jointly the year that your spouse passed away.

You’ll also need to have a dependent child, and you have to have paid more than half of the cost of caring for your home. However, if your child does not live there primarily, then you wouldn’t qualify for this status.

If you file as a qualified widow or widower, you can claim the same standard deduction as the tax filing status married filing jointly. That means you can get double the deduction for the two years after you lose your spouse.

But if you remarry by the end of the year your spouse dies, you wouldn’t qualify. However, you can file jointly with your new spouse.

How Do You Know Which Status Is Right?

Consider your situation as of December 31 of the tax year in question. If you were married, you can choose between filing separately or jointly. In that case, you’ll need to decide which tax benefits are more important.

If you care for a child or an adult dependent, you may consider filing as a head of household. And if you lost a spouse and have a child, you can file as a qualified widow or widower.

When you don’t fit any of those tax filing statuses, you can use the single status. That way, you can file your taxes and claim the standard deduction for your income.

What Happens If You Do Something Wrong?

If you file your taxes incorrectly, the IRS will send you a letter. Avoid falling into phone call scams where people try to get your tax information.

You can also see website and program options to help get you through the issue. This can help if you can’t afford to pay any taxes that you owe the IRS.

Can You File Taxes Online for Any Status?

If you want to file your taxes online, you can use the software of your choice. Most tax programs will walk you through the steps, and they can help you decide on the right status for you.

Then, you can file your taxes and, hopefully, avoid any issues related to your taxes.

Tax Filing Statuses

Knowing the basic tax filing statuses can help you come tax season. If you know which status you qualify for, you can get started on your taxes sooner.

Whether you’re young and single or are older and have a spouse, you can file your taxes. Consider your options and deductions to choose the right status for you. Are you looking for vat registration dubai then read more how to apply for VAT registration in UAE.

Did you enjoy this article? Check out our finance section for similar content! 

LEAVE A REPLY

Please enter your comment!
Please enter your name here