Maximize Your Tax Savings: Understanding Head of Household (HOH) Filing Status

Head of household (HOH) is a valuable tax filing status for individuals who are unmarried and financially support a qualifying person. By filing as HOH, you can benefit from higher standard deductions and lower tax rates, offering a significant financial boost compared to other filing statuses like single or married filing separately.

Key Takeaways

Head of Household is a filing status used by unmarried taxpayers who support and house a qualifying person.
To qualify for HOH status, you must file a separate individual tax return, be considered unmarried, and have a qualifying child or dependent.
The IRS allows HOH status if the qualifying person is usually your child or parent.
You must pay more than half of the qualifying person’s support and housing costs to claim HOH status.
The HOH status provides financial relief with higher standard deductions and lower tax rates compared to single filers.

Understanding the Head of Household (HOH) Status

HOH is a specialized filing status available to taxpayers meeting specific criteria. To file as HOH, you need to file a separate individual tax return, be considered unmarried, and have a qualifying dependent like a child or parent. Additionally, you must cover more than half of the cost of supporting and maintaining the primary home where the qualifying person resides. This status is detailed further in IRS Publication 501.

Qualifying Conditions

Unmarried:

The HOH must be single, divorced, or treated as unmarried. For instance, married individuals are considered unmarried if they have not lived with their spouse during the last six months of the tax year.
Two scenarios qualify an otherwise married person as unmarried:
- Married to a nonresident alien and electing not to treat them as a resident alien.
- Legally separated under a divorce or separate maintenance decree by the end of the tax year.

Financial Support:

The HOH must pay for more than half of a qualifying dependent’s support and housing costs. This includes rent/mortgage, utilities, repairs, insurance, taxes, etc. The home must be the HOH’s unless the qualifying person is a parent, and then their home can qualify if the HOH covers over half their living expenses.
If the qualifying person is a situational dependent such as a parent living at a separate address, the HOH can still claim the status by meeting the same financial support requirements.

Effects of the Tax Cuts and Jobs Act (TCJA)

With the introduction of the Tax Cuts and Jobs Act (TCJA) of 2017, the personal exemption was suspended through 2025. Prior to this, HOH filers needed to be able to claim an exemption for their qualifying person, with the possibility of releasing it in a divorce or legal separation setting while maintaining HOH eligibility.

Head of Household vs. Single Filing

Choosing to file as HOH rather than single offers considerable tax advantages in two critical areas:

Tax Rates: HOH filers enjoy wider tax brackets, resulting in lower tax amounts compared to single filers. For example, in 2022, single filers reach the top of the 12% bracket at $41,775, whereas HOH filers can have incomes up to $55,900 in the 12% bracket.
Deductions: HOH filers benefit from a larger standard deduction. For instance, in 2022, single filers have a standard deduction of $12,950, compared to $19,400 for HOH filers.

Examples of Filing as Head of Household

Consider a taxpayer with a $70,000 annual income:

2022 HOH vs. Single/Married Filing Separately:
- HOH filer has a standard deduction of $19,400, reducing taxable income to $50,600. Calculated tax: $5,773.
- Single filer has a standard deduction of $12,950, reducing taxable income to $57,050. Calculated tax: $8,168.10
- Savings for HOH filer: $2,395.10

=> Impact for 2023: Due to adjusted income limits and deductions for inflation, savings will increase. HOH standard deduction rises to $20,800 vs. $13,850 for single.

2022 and 2023 IRS Tax Brackets Overview:

 1|              2022 Tax Brackets for Single Filers, Married Couples Filing Jointly, and Heads of Households               ||||
 2|-------------------|-----------------------|--------------------------------------------------|-----------------------------|
 3| **2022 Tax Rate** | **For Single Filers** | **For Married Individuals Filing Joint Returns** | **For Heads of Households** |
 4| 10%               | $0 to $10,275         | $0 to $20,550                                    | $0, to $14,650              |
 5| 12%               | $10,276 to $41,775    | $20,551 to $83,550                               | $14,651 to $55,900          |
 6| 22%               | $41,776 to $89,075    | $83,551 to $178,150                              | $55,901 to $89,050          |
 7| 24%               | $89,076 to $170,050   | $178,151 to $340,100                             | $89,051 to $170,050         |
 8| 32%               | $170,051 to $215,950  | $340,101 to $431,900                             | $170,051 to $215,950        |
 9| 35%               | $215,951 to $539,900  | $431,901 to $647,850                             | $215,951 to $539,900        |
10| 37%               | $539,901 or more      | $647,851 or more                                 | $539,901 or more            |

2023 Tax Brackets

 1|              2023 Tax Brackets for Single Filers, Married Couples Filing Jointly, and Heads of Households               ||||
 2|-------------------|-----------------------|--------------------------------------------------|-----------------------------|
 3| **2023 Tax Rate** | **For Single Filers** | **For Married Individuals Filing Joint Returns** | **For Heads of Households** |
 4| 10%               | $0 to $11,000         | $0 to $22,000                                    | $0, to $15,700              |
 5| 12%               | $11,001 to $44,725    | $22,001 to $89,450                               | $15,701 to $59,850          |
 6| 22%               | $44,726 to $95,375    | $89,451 to $190,750                              | $59,851 to $95,350          |
 7| 24%               | $95,376 to $182,100   | $190,751 to $364,200                             | $95,351 to $182,100         |
 8| 32%               | $182,101 to $231,250  | $364,201 to $462,500                             | $182,101 to $231,250        |
 9| 35%               | $231,251 to $578,125  | $462,501 to $693,750                             | $231,251 to $578,100        |
10| 37%               | $578,126 or more      | $693,751 or more                                 | $578,101 or more            |

Qualification for Head of Household

Taxpayers must be considered unmarried, spend at least half on household expenses, and support a dependent living with them more than half the year or cover half of the housing costs for a parent.

Better to Claim HOH or Single?

Almost always, it’s better to claim HOH due to lower tax rates and higher standard deductions.

What is the Standard Deduction for HOH?

For 2022, the standard deduction is $19,400. For 2023, it increases to $20,800.

The Bottom Line

Head of household (HOH) is specifically for unmarried taxpayers who support and house a qualifying person. Filing as HOH usually means enjoying higher standard deductions and a lower rate of taxation, thereby leading to significant tax savings. If you meet the criteria, taking advantage of the HOH status can provide considerable financial ease.

Related Terms: standard deduction, dependent, IRS tax brackets, filing status, unmarried taxpayer

References

Internal Revenue Service. “Publication 501”.
Internal Revenue Service. “Tax Guide 2021 for Individuals”, Page 24.
Internal Revenue Service. “Tax Guide 2021 for Individuals”, Pages 24-25.
Internal Revenue Service. “Publication 5307: Tax Reform Basics for Individuals and Families”, Page 7.
Internal Revenue Service. “Publication 17: Your Federal Income Tax for Individuals”, Page 24.
Tax Foundation. “2023 Tax Brackets”.
Tax Foundation. “2022 Tax Brackets”.
Internal Revenue Service. “IRS Provides Tax Inflation Adjustments for Tax Year 2023”.
Internal Revenue Service. “Publication 501 (2021), Dependents, Standard Deduction, and Filing Information”.

Get ready to put your knowledge to the test with this intriguing quiz!

--- primaryColor: 'rgb(121, 82, 179)' secondaryColor: '#DDDDDD' textColor: black shuffle_questions: true --- Certainly! Here are 10 quizzes based on the term "Head of Household" from Investopedia: ## What is one of the primary benefits of filing taxes as Head of Household? - [ ] Higher effective tax rate - [ ] Reduced standard deduction - [x] Lower tax rate compared to single filers - [ ] Limited access to tax credits ## Which of the following is a qualification requirement for Head of Household status? - [ ] Being unmarried for the entire tax year - [ ] Earning over $75,000 annually - [ ] Having zero dependents - [x] Providing more than half the cost of maintaining the home for a qualifying person ## Can married individuals qualify for Head of Household status? - [ ] Yes, under any circumstances - [ ] Yes, if they file jointly - [ ] Yes, if they live with their spouse - [x] Yes, if they live apart from their spouse for the last six months of the year and meet other requirements ## Which of these tax benefits is specifically associated with Head of Household status? - [ ] Ability to file jointly - [ ] No income tax liability - [x] Enjoying a higher standard deduction than single filers - [ ] Lower Medicare taxes ## Who could be considered a "qualifying person" for Head of Household status? - [ ] Any friend or roommate - [ ] Any co-worker - [ ] A landlord - [x] A child, parent, or other relative dependent as defined by IRS ## What is the IRS publication that offers guidance on Head of Household status? - [ ] Publication 15 - [ ] Publication 53 - [x] Publication 501 - [ ] Publication 124 ## For Head of Household status, what is the minimum period for maintaining the home for the qualifying person? - [ ] Entire tax year - [ ] Nine months - [x] More than half of the tax year - [ ] Three months ## Why is it often financially beneficial to qualify for Head of Household filing? - [ ] Lower Social Security taxes - [ ] Higher capital gains taxes - [x] Access to more favorable tax brackets and a higher standard deduction - [ ] Exemption from paying state taxes ## Can a taxpayer with a dependent parent qualify for Head of Household status? - [ ] No, only if they have a dependent child - [x] Yes, if they meet all other IRS requirements - [ ] No, parents do not qualify - [ ] Yes, only if the parent lives in the same home ## Which of the following statements is true about the Head of Household filing status? - [ ] It is the most common filing status - [ ] It applies only to taxpayers above the age of 60 - [ ] It can be selected by married couples filing jointly - [x] It offers tax advantages to qualifying single taxpayers with dependents The above markdown includes a variety of questions covering eligibility, benefits, and general knowledge of the Head of Household filing status.