What Is the Head of Household Deduction?

How you file your taxes has a lot to do with how much money you save on your tax bill. The IRS has 5 different filing status options, and you must choose one. The head of household deduction is one of the most beneficial filing statuses because it offers those who claim it a larger standard deduction and broader tax brackets. Both of which have a huge impact on how much you pay in taxes. Read on to learn more about the head of household deduction. 

head of household family

Head of Household Definition

When it comes to filing status, the head of household is one of the most advantageous for taxpayers. It applies to unmarried taxpayers who have dependents. The head of household deduction increases the standard deduction to $18,350, this is up from the single filer standard deduction of $12,200. This decreases your taxable income, which in turn lowers your tax bill. 

In addition, the tax brackets under head of household are larger. This increases the income threshold in the lower brackets, which allows you to pay a lower tax rate on your taxable income. For example, if your taxable income was $50k, under the single filer tax bracket you would be taxed at 22%, but on the head of household tax bracket, you would be charged at 12%. That’s a major discount.

Head of Household Requirements

Not just anyone can claim the head of household deduction. There are certain requirements that must be met in order to claim the head of household deduction. For starters, you must be unmarried. If you have never been married, congratulations you qualify. However, for those that have been married and are now separated or divorced, it’s a little more complicated. Technically the taxpayer must be unmarried on the last day of the year. However, if you have been separated for at least the last 6 months of the year you may still qualify. Talk to your tax advisor about your particular situation. 

To claim the head of household discount, you must also have qualified dependents. Some examples of qualifying dependents include biological children, adopted children, stepchildren, siblings, step-siblings, foster children, and grandchildren. Your dependents must be younger than you unless they have a permanent disability. They must be 19 or younger by the end of the tax year, or 24 or younger if they are a student. In addition, they must have lived with you at least half of the year and you must have paid more than half of their living expenses. 

Parents and grandparents may also qualify as dependents. However, you must pay over half of their living expenses, and their income cannot exceed $4,200. Parents and grandparents may qualify even if they don’t live with you. You must be able to demonstrate that you pay more than half of their living expenses. 

How Much Can I Save With HOH?

You could stand to save a significant amount of money on your taxes by filing as head of household. The increase in the standard deduction significantly lowers your taxable income, and with the expanded tax brackets, you stand to be taxed at a lower rate than if you were to file as single. This could mean saving thousands on your taxes. In addition to an increased standard deduction and lower tax rate, there are other deductions you may be able to qualify for if you are filing as head of household. For example, the child tax credit is $2,000 per child, $1,400 of which is refundable, meaning if any residual amount of the tax credit can earn you a tax refund. Child care costs can also be tax-deductible. 

tax refund status

How to Claim the HOH Deduction

Claiming the head of household discount is simple. First, check and see if you meet all of the requirements; not married and have qualifying dependents who you paid more than half of expenses for. Once you have established if you qualify for the head of household deduction, simply prepare and file your taxes by the due date.

More Ways to Save on Taxes

Working with a tax advisor is the best way to ensure that you are getting all of the tax breaks you deserve. The Shared Economy Tax pros can show you the best ways to file and introduce you to the best deductions and tax credits. Get started today with a free one-on-one strategy session with of the Shared Economy Tax experts. You can also subscribe to our newsletter using the form below for more free tax tips.