NJ tax tips: Is it better to file as head of household?
Q. What’s the advantage of filing as head of household?
— Checking it out
A. There may be many advantages to filing head of household, or HOH.
For starters, for 2015, the the standard deduction for those filing with HOH status was $9,250, said Laurie Wolfe, a certified public accountant with Lassus Wherley in New Providence. That’s almost $3,000 more than if you filed using a single status.
The other major advantage to this status is that the tax brackets are more generous to the HOH status, she said. That means you will have more money taxed at the lower tax rates than if you filed single status.
For example, your first $13,150 of taxable income is taxed at 10 percent, compared to $9,225 for single status filers, she said.
Who qualifies for this filing status?
“If you were not married on the last day of the tax year and you provided more than half the cost of maintaining a household for a `qualifying individual’ who lived with you for more than six months, you will qualify for HOH status,” Wolfe said.
There are some caveats to that statement, Wolfe said. You can be considered unmarried if your spouse lived separately from you for the last six months of the year and your household is the principal place of abode of a child for whom you are entitled to a dependency exemption. A second caveat is that if the qualifying individual is a dependent parent, that person is not required to live in the home with you, she said.
Let’s take it a step further and talk about the terms mentioned above.
“The cost of maintaining a household includes property taxes, mortgage interest, rent, utilities, repairs and maintenance, insurance and food,” Wolfe said. “You would not include clothing, education or transportation costs.”
Then there’s the term “qualifying individual.” That can be a child, a parent or another relative, and each has different rules, Wolfe said.
“Generally, a single child who is a qualifying child of yours for dependency exemption purposes is a qualifying individual,” Wolfe said. “A divorced person who agrees to waive their right to claim the dependency exemption, however, can still qualify for HOH status.”
Your child who is not a qualifying child because of the age requirements can be considered a qualifying relative, she said, and your parent will qualify if you can claim an exemption for him/her.
Wolfe said a relative other than a parent or child would qualify for HOH purposes if that person lived with you for more than half the year and if you can claim an exemption for that relative, as long as they’re related to you in one of the following ways:
- Child, stepchild, foster child, or a descendant of any of them. (A legally adopted child is considered a child.)
- Brother, sister, half-brother, half-sister, stepbrother, stepsister.
- Grandparent or direct ancestor but not foster parent.
- Stepfather or stepmother.
- Son or daughter of the taxpayer’s brother or sister.
- Brother or sister of the taxpayer’s father or mother.
- Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
Before of all these rules, make sure to talk to your tax preparer to make sure you qualify.
Karin Price Mueller writes the Bamboozled column for The Star-Ledger and she’s the founder of NJMoneyHelp.com. Click here to sign up for the NJMoneyHelp.com weekly e-newsletter. Like NJMoneyHelp.com on Facebook and follow it on Twitter.