Is Your Filing Status Head of Household - IRS Publication 501 - John R. Dundon II, Enrolled Agent
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Is Your Filing Status Head of Household – IRS Publication 501

Business Entity Selection and the Tax Consequences of Converting

Is Your Filing Status Head of Household – IRS Publication 501

According to IRS Publication 501 if you are not married, but provide a home for a qualifying dependent, you may be able to use the head of household filing status. The head of household filing status provides a higher standard deduction, lower tax brackets, and generally a better tax outcome than the single filing status or married filing separately status provide. A married individual who has separated from his or her spouse, but is not yet divorced, may also qualify to use the head of household status if he or she meets a number of tests; but applying the tests to grandparents can is tricky.

Under Sec. 2(b)(1), you may use the head of household filing status if you:

• are not married and are not a qualifying widow(er) at the end of the taxable year, and
• Maintain as your home a household that is the principal place of abode for more than half the year for a qualifying child under Sec. 152(c) or other qualifying dependent for whom a deduction is allowed under Sec. 151. Maintaining a household means that the taxpayer furnishes more than half the household costs during the year. These costs include rent or mortgage interest, repairs, utilities, and meals eaten at home.

Under Sec. 2(b)(2)(A), you are not married if you are legally separated from your spouse under a decree of divorce or separate maintenance. Many people mistakenly believe that physical separation— one spouse moving out of the house— and contacting an attorney to set the wheels in motion for a divorce equate to being legally separated. However, the key word in the statute is “decree”—a court issued document stating the terms of your divorce or separation agreement.

Under Sec. 2(c) and Sec. 7703(b), it is possible for married taxpayers who live apart to be treated as not married for head of household purposes. The taxpayer must:
• Be married;
• Maintain as their home a household that is the principal place of abode of a child within the meaning of Sec. 152(f)(1);
• Be eligible to claim the dependency exemption for the child;
• Furnish over half the cost of maintaining the household; and
• Not live in the same household with your spouse during the last six months of the year.

There is another important difference between the rules for unmarried taxpayers and those treated as not married—that difference has to do with who the qualifying dependent is.

For unmarried taxpayers, the entire spectrum of qualifying child relationships under Sec. 152(c)(2) is allowed: children, siblings, and descendants of each. Additionally, unmarried taxpayers with certain other qualifying dependents, such as parents, may use the head of household filing status.

For married taxpayers to be treated as not married, the list of qualifying dependents is quite short. Under Sec. 152(f)(1), the dependent must be the taxpayer’s son, daughter, stepson, stepdaughter, legally adopted son or daughter or an eligible foster child.

The definition of eligible foster child under Sec. 152(f)(1)(C) is a
child who is “placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of
competent jurisdiction.” A taxpayer who takes care of a child and who is contemplating a divorce may wrongly assume that head of household status is automatically available. The taxpayer must understand that if the taxpayer is still married, it is possible to
be treated as not married, but the list of qualifying relationships is short. If the child in the taxpayer’s care is a grandchild, niece,
nephew, brother, or sister, the taxpayer may want to consider gaining legal custody of the child.

Notice that this section does not say anything about descendants of children, siblings, parents, or list any other types of qualifying relationships.