FILING STATUS

 
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Posted On : 26th Nov 2010

FILING STATUS

You must determine your filing status before you can determine your filing requirements, standard deduction, and correct tax . You also use your filing status in determining whether you are eligible to claim certain deductions and credits.

  • Single.

  • Married Filing Jointly.

  • Married Filing Separately.

  • Head of Household.

  • Qualifying Widow(er) With Dependent Child

1. SINGLE:

Your filing status is single if, on the last day of the year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree, and you do not qualify for another filing status. To determine your marital status on the last day of the year.

Widow(er).  Your filing status may be single if you were widowed before January 1, 2007, and did not remarry before the end of 2007. However, you might be able to use another filing status (Head of Household) that will give you a lower tax.

2. MARRIED FILING JOINTLY:

You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.

If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.

Spouse died during the year. If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status.

Divorced persons. If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose married filing jointly as your filing status.

3. MARRIED FILING SEPATELY:

You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.

If you and your spouse do not agree to file a joint return, you may have to use this filing status unless you qualify for head of household status, discussed next.

You may be able to choose head of household filing status if you live apart from your spouse, meet certain tests, and are considered unmarried. This can apply to you even if you are not divorced or legally separated. If you qualify to file as head of household, instead of as married filing separately, your tax may be lower, you may be able to claim the earned income credit and certain other credits, and your standard deduction will be higher. The head of household filing status allows you to choose the standard deduction even if your spouse chooses to itemize deductions.

 
Special Rules: If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you will usually pay more tax on a separate return than if you used another filing status that you qualify for.

  1. Your tax rate generally will be higher than it would be on a joint return.

  2. Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.

  3. You cannot take the earned income credit.

  4. You cannot take the exclusion or credit for adoption expenses in most cases.

  5. You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.

  6. You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.

  7. If you lived with your spouse at any time during the tax year:

    1. You cannot claim the credit for the elderly or the disabled,

    2. You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and

    3. You cannot roll over amounts from a traditional IRA into a Roth IRA.

  8. The following deductions and credits are reduced at income levels that are half those for a joint return:

    1. The child tax credit,

    2. The retirement savings contributions credit,

    3. Itemized deductions, and

    4. The deduction for personal exemptions.

  9. Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).

  10. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.

4. HEAD OF HOUSEHOLD:

You may be able to file as head of household if you meet all the following requirements.

  1. You are unmarried or “considered unmarried” on the last day of the year.

  2. You paid more than half the cost of keeping up a home for the year.

  3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you.

If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. You will also receive a higher standard deduction than if you file as single or married filing separately.

4. QUALIFYING WIDOW(ER) WITH DEPENDENT CHILD:

If your spouse died in 2007, you can use married filing jointly as your filing status for 2007 if you otherwise qualify to use that status. The year of death is the last year for which you can file jointly with your deceased spouse.

You may be eligible to use qualifying widow(er) with dependent child as your filing status for 2 years following the year your spouse died. For example, if your spouse died in 2006, and you have not remarried, you may be able to use this filing status for 2007 and 2008.

This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). This status does not entitle you to file a joint return.

Eligibility Rules.   You are eligible to file your 2007 return as a qualifying widow(er) with dependent child if you meet all of the following tests.

  • You were entitled to file a joint return with your spouse for the year your spouse died. It does not matter whether you actually filed a joint return.

  • Your spouse died in 2005 or 2006 and you did not remarry before the end of 2007.

  • You have a child or stepchild for whom you can claim an exemption. This does not include a foster child.

  • This child lived in your home all year, except for temporary absences. There are also exceptions, for a child who was born or died during the year, and for a kidnapped child.

  • You paid more than half the cost of keeping up a home for the year.

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