Understanding your filing status choices and selecting the one
that is best for you can cut your tax bill. Your filing status
determines your tax bracket. It also sets the income level at which
you become ineligible for certain tax benefits, such as deductible
IRAs and the child tax credit.
Understanding your filing status choices and selecting the one that is best for you can cut your tax bill. Your filing status determines your tax bracket. It also sets the income level at which you become ineligible for certain tax benefits, such as deductible IRAs and the child tax credit.
Your filing status is determined by your marital status on the last day of the year. It’s easy to determine whether you are married or single on the last day of the year – or is it? What if you are widowed? What if you are married, but legally separated from your spouse?
You must choose from the following filing statuses: single, married filing jointly, married filing separately or head of household. There may be more than one choice that could apply in your situation.
Let’s compare the tax bill under each filing status for a taxpayer with $40,000 of taxable income for 2004.
Single: $6,744
Married filing jointly: $5,289
Married filing separately: $6,744
Head of household:
$5,606
A single parent with a qualifying child could save $1,138 by claiming head of household status rather than filing as single. A legally separated taxpayer also could save $1,138 if he or she qualified to claim head of household status rather than choosing married filing separately status.
Selecting the correct filing status isn’t always easy. You should consider both your tax situation and your personal situation before selecting a filing status on your return.
Kris D. Nolan is a partner and CPA here at Bianchi, Lorincz & Company.
