Tax season brings a lot of questions and often anxiety regarding your taxes. New parents have new members of their family who will likely impact their tax returns. For unmarried parents, determining the most advantageous filing status is pretty important. One common question that comes up is whether both parents who live with the child can file as head of household, which can provide more tax savings than filing as single. The short answer is that no, both parents cannot file as head of household. Read along to understand who might be able to file as head of household.
Head of household is generally more favorable than filing as single because filers qualify for a higher standard deduction that helps with lower taxes. To use this tax status a couple of criteria must be met.
You are legally separated or unmarried on the last day of the tax year (December 31st)
You are married but lived apart from your spouse for the last 6 months of the tax year and you are not filing a joint return with your spouse
In addition, the following should also apply:
You should pay more than half of the cost of maintaining your home for yourself and a qualifying child
With this definition, you can see how unmarried parents, especially those who live together with their children can be confused regarding who gets to use this tax status. However, only one parent can qualify for head of household. This status is determined by where the child lives most of the year and who covers most of the expenses to take care of the home. If the child lives with both parents then there is a tiebreaker test, but in many cases the person who has the highest adjusted gross income can claim the child.
It is important to have this discussion with both parents and agree on who should claim the child because if more than one person tried to claim the child as a dependent then this is cause for the IRS to reject your tax return.
Other considerations for Head of Household filing status
What is considered the cost of maintaining a home for head of household status includes the following:
- Rent, mortgage, and property taxes
- Home insurance, repairs, and utilities
- Food provided at the home
Costs for determining this status do not include the following
- Medical costs
- Vacation
- Life Insurance
- Transportation
Who is a qualifying person for head of household status?
A qualifying child is required to claim the head of household status. A qualifying child may generally be one of the following
- Your biological children
- Your adopted children
- Your stepchildren
- A foster child
- Your sibling or step-sibling
- Or a child from any one of these – like a grandchild, niece, or nephew
- A married child who is claimable as a dependent
- A dependent parent
It’s important to note that a distant relative living with you might qualify to be a dependent but can not be a qualifying person for the head of household status. An example of a distant relative would be a cousin.
