Do you really know your best filing status?💥

Hi!

Choosing the correct filing status is very important. Your filing status selection, if planned properly in advance, can have an effect of thousands of dollars on your tax returns. Actually, we see filing status differences in the 10’s of thousands of dollars in tax on a regular basis! 💰

This not only includes selecting joint/separate/single, but also includes what dependents you are taking, whether your dependents are working, location of each family member, and many other factors.

Filing statuses can get complicated when certain big life changes occur, such as your child going to college and starting to earn income, divorce or separation, and etc. For this reason, I wanted to summarize some helpful ideas before year-end. Below are the basics:

Your tax filing status is determined by your situation on December 31st of the year. Options are as follows:

1. 1. Single. Normally this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.

1. 1. Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. When a spouse passes away, the widowed spouse can usually file a joint return for that year. Some tax benefits such as education credits and the earned income credit are not available to married taxpayers who file separately.

1. 1. Married filing separately. Married couples can choose to file separate tax returns. When doing so, it may result in less tax owed than filing a joint tax return, such as one spouse has low income with high medical bills, one spouse has low income paying student loan, etc.

1. 1. Head of household. Unmarried taxpayers may be able to file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year. You must be either single or considered unmarried on the last day of the year. Married taxpayers count as single for tax purposes if they haven’t lived in the same home as their spouse for at least the last six months of the year.

1. 1. Qualifying widow(er) with dependent child. This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply. If you remarry, you can’t claim this filing status anymore.

If you need help planning & making sense of the above, please reach out as soon as possible so we can get a plan ready for you. 

Looking forward to hearing from you!

—

George Dimov CPA

www.dimovtax.com

(833) 829-1120 toll free