Head of Household Rules
The IRS gives additional benefit to those who are considered to be the head of their household. This designation, aptly dubbed head of household, has become more difficult to declare on taxes over the years, as the rules have become more stringent. It is important to understand these rules to prevent fees and penalties coming back to you later.
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Why Claim Head of Household
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Those who file as head of household generally have a lower tax rate than those who file single or married; your standard deductions go up as well, making it advantageous in some cases to file under the head of household status if you qualify. To indicate that you are claiming the head of household filing status, check Line 4 on IRS Form 1040A or 1040. When determining your tax rate, use the head of household column on the Tax Table or complete Section D of the Tax Computation Worksheet.
Meeting the Requirements
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You must meet three IRS requirements in order to properly claim the head of household status. You must be unmarried, you must pay more than half of the cost of maintaining your home, and you must have a qualifying person living with you for more than half the year -- unless the qualifying person is your parent, who does not have to live with you.
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Unmarried
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You must meet certain specifications to qualify as unmarried. An unmarried person at the end of the year is a person who is naturally single, never married or not entered into a registered domestic partnership. If you have been married or in a registered domestic partnership, you must have a final dissolution or divorce decree prior to year's end. Being separated and pending divorce does not count; your dissolution or divorce must be finalized and court registered.
Costs Paid
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You must also be responsible for at least half of the home care and upkeep of your home for the year you are claiming head of household. For homes with two or more incomes, this is important to understand. If two or more families share the same home, then each family can treat their respective portion as their own to determine a head of household within their own clan. Each family must keep their own financial records and must not contribute to the support of the other family to qualify. Costs include rent, mortgage, property taxes, property insurance, utilities, maintenance and repairs and food.
Qualifying Person
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A qualifying person must reside with you for at least half of the year in order for you to claim head of household. This person must be related to you and is most often a child. They may also be a step-child, grandchild, sibling or half-sibling, parents, step-parents or in-laws. This person must be living in your home for at least half of the year, unless they have an excused absence, such as being away for school.
Parents may also be considered a qualifying person even if they do not live at your home as long as they pass the support test: you have paid at least half of the cost of maintaining their home (whether a private residence or the expenses of a home for elderly care) for the year. Any qualifying person must meet the income limitations set by the federal government exemption.
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