The starting point to filing taxes is figuring out your filing status. It can determine the tax bracket you may fall under, what deductions and credits may be available to you, and ultimately what you may end up owing in taxes.
Status Update
Generally, your filing status hinges upon the last day of the tax year. So for example, despite being single for the majority of the tax year, if you get married on December 31st, you can file as a married couple for that tax year. There are 5 filing status types available to use for your tax filing: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow/Widower.
- Single – Perhaps the most straightforward. Generally you are considered this if you do not meet any of the other statuses such as married or qualifying widower.
- Married Filing Jointly (MFJ) – You and your spouse agree to file jointly, which has the advantages of combining income and other benefits like a higher standard deduction and different tax brackets.
- Married Filing Separately (MFS) – Spouses also have the option to file separately, which means your income and any connected deductions or credits are handled separately. The standard deduction is also lower. It may be advantageous in certain taxpayer situations though.
- Head of Household (HOH) – To qualify for this, you must be considered unmarried (single) on the last day of the year, pay more than half of the cost of upkeep for a home for the year, and a qualified dependent lives with you for at least more than half of the year. Allows access to a slightly higher standard deduction and different tax brackets than single.
- Qualifying Widow/Widower – If your spouse dies within the tax year, you are allowed to file MFJ for that year, otherwise you may be a qualifying widow/widower. This status can be claimed for two years following the spouse’s death. You must also have a qualified dependent under you. Qualifying Widow/Widower has benefits similar to MFJ, such as access to the higher standard deduction.
In some cases, you may qualify for more than one status. Generally, you want to select the one that provides the best tax benefit available, such as opting to file as a qualifying widow/widower rather than head of household (assume you meet both statuses).
Determining which filing status benefits you can get complicated, especially if you happen to be running a business as well. A trusted back-office team to handle tax questions like this and the accounting can free you up to run your business properly. MiklosCPA, a California-based tax and accounting firm, has helped many small businesses of assorted industries with their tax and accounting needs. If you want to learn more of our services, drop us a line! Also, follow our social media pages to stay updated on future “good-to-know” posts.