How to choose a filing status

Editor’s note: Have you ever questioned whether you are using the correct tax filing status on your return? It seems like a simple thing to choose, but it’s a big one in the long run. The Tax Institute has some helpful information for you. 

Your tax filing status is one of the most important decisions you’ll make in filing your return. It determines your standard deduction, as well as other deductions and credits. So, don’t take it lightly.

In some cases, the filing status you need to use is crystal clear. In other cases, it’s a bit tricky. No matter how complicated it is, you usually determine it based on your status as of the last day of the year. For this year, that would be Dec. 31, 2023.

Here are a few questions – and additional resources – to help you narrow down which tax filing status might be the most advantageous for you.

Are you married?

Really, this question is: Are you married or considered married on the last day of the year? Or are you unmarried or considered unmarried on the last day of the year?

That’s a lot of “or”. Here’s the deal. If you’re married and living together, then you’re married! (We hope that’s not a surprise.)

You’re also married for tax filing status purposes if:

• You’re living together in a common law marriage recognized by the state you live in, or by the state where the common law marriage began.
• You’re married and living apart, but not legally separated.
• You’re separated under an interlocutory (not final) decree of divorce.

If you meet any of those criteria, you can choose to file as married filing jointly or married filing separately…

UNLESS you accepted a premium tax credit under the Affordable Care Act. If that’s the case, you need to file as married filing jointly in order to receive the credit.

Should you file jointly or separately?

That’s up to you. Couples typically find that it is most advantageous to file jointly. However, there are many good reasons to file separately, as well. You should speak with a tax professional if you think some of those reasons might apply to you.

Now there’s the flip side of the coin: unmarried. If you haven’t ever been married, then it’s easy to say that you’re filing status is unmarried.

If on the last day of the year you’re legally separated from your spouse under a final divorce or separate maintenance decree or if you have a court decree of annulment, then you’re considered unmarried for tax purposes. If you obtained an annulment and filed as married in prior years, then you’ll need to amend those earlier returns.

If you are unmarried

There are two filing statuses in this category – single and head of household. So there are a few more questions to ask.

Do you have kids?

If the answer is no, your filing status is likely single. UNLESS…

Did you maintain a household for a qualifying child or a qualifying relative?

If the answer is yes, your filing status is likely head of household. Be careful though. Head of household can be a tricky one. First, you need to have paid more than half the cost of maintaining a household for the year – and you can’t include just anything in that calculation. It specifically looks at rent, mortgage interest, real estate taxes, home insurance, property taxes, repairs, utilities, and food eaten in the home. Then, you must have had a qualifying child or relative who lived with you for more than half the year and you can claim as a dependent.

Read all about Head of Household status and who can be a qualifying relative.

Filing as head of household lets you claim a larger standard deduction and reduces your taxable income.

The fifth filing status – qualifying widowe(er)

If your spouse died in 2022 and you didn’t remarry, you must use married filing jointly or married filing separately on your return. You’re considered married for the entire year. For up to two years after the death of your spouse, if you don’t remarry and have a dependent child, you can use the qualifying widow(er) filing status. This lets you use the married filing jointly tax brackets.