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SINGLE
You are considered to be a single filer if you are
unmarried, divorced, or legally separated from your spouse on the
last day of the tax year. If you have dependents that you support,
you may qualify for a more favorable filing status, such as head of
household or qualifying widower.
MARRIED FILING JOINTLY
You may file jointly if 1) on the last day of the tax
year you were married and living together as husband and wife, or
(2) were married and living apart, but not legally separated under a
divorce decree or separate maintenance agreement. You may also file
jointly if your spouse died in 2006 and you did not remarry.
When you’re married and file a joint return, both spouses report
their income on the same Form 1040 and both are responsible for any
tax due. For married couples, generally filing jointly offers the
greatest tax savings. But despite the tax advantages, there are
certain instances (described below) when it may not be advisable to
file jointly.
MARRIED FILING SEPARATELY
Couples who are married but file separately report their
income, exemptions, and deductions on separate individual returns.
In most cases, these couples pay a higher tax rate than joint
filers. That is due, in part, to the fact that when you file
separately you lose some of the tax credits and deductions you could
have claimed on a joint return. These include the child and
dependent care credit, the adoption expense credit, and the Hope
Scholarship and Lifetime Learning credits. You also lose out on
deducting student loan interest.
However, there are times when filing separately might benefit your
overall tax situation – for example, if one spouse has high medical
or miscellaneous itemized deductions. These expenses are deductible
only to the extent that they exceed a certain percentage (7.5% for
medical and 2% for miscellaneous deductions) of your adjusted gross
income (AGI). By filing separately, the AGI for each spouse is
reduced, making it easier to qualify for the deduction.
HEAD OF HOUSEHOLD
Head of Household tax rates are lower than those for
single or married filing separately taxpayers. To be eligible, you
must be unmarried at the end of the year and not entitled to file as
a qualifying widow(er) with a dependent child. You also must have
paid more than half the cost of maintaining the main home of a
qualifying person who lived in the home for more than six months. In
some cases, married persons who have not lived with their spouses
may qualify for this status.
QUALIFYING WIDOW OR WIDOWER WITH QUALIFYING
CHILD
You are generally eligible to use the qualifying widow(er)
with dependent child status as your filing status for the two years
following your spouse’s death if you have not remarried. To qualify,
you must meet the following criteria:
(1) You were entitled to file a joint return with your spouse the
year before he/she died (regardless of whether you actually did)(2)
You have a child, stepchild, adopted or foster child that you claim
as a dependent
(3) For the past year, you paid more than half the cost of
maintaining your main home in which your dependent child lived for
more than half of the year.
Choosing the right filing status can make a significant difference
in the amount of taxes you pay. A CPA can help you determine the
most advantageous filing status for your situation.
Brought to you by the North Carolina
Association of Certified Public Accountants in cooperation with the AICPA.
©2007 The American Institute of Certified Public Accountants |
