It’s that Taxing Time of Year, Part II

“Are You the Head of Your Household?”

If you were unmarried at the end of a tax year and maintained a household for your child, parent or other qualifying relative you can file as “head of household” which has more favorable tax rates than those for a married person filing separately. But did you know that you may be able to be treated as “unmarried” and qualify for head of household tax rates even if you remain married? Here’s how.

Many couples today are choosing to remain married long after they separate in order to keep the family health insurance coverage. This is because there is usually no reduction in the premium if one spouse is removed from the coverage upon the divorce. One big problem with that is the couple is then supposed to file future tax returns “married filing separately” which usually produces the greatest tax liability.

But if you are married and have lived apart from your spouse for the last six months of the tax year, paid over half the cost of keeping up your main residence and are able to claim a child as your dependent, you may be able to file as “head of household” and take advantage of the more favorable tax rates that filing status allows.

While you must be able to claim the child as a dependent, you don’t need to actually claim the child on your tax return in order to file as head of household. You must only provide more than half of the cost of maintaining a home for your child, stepchild or adopted child and he or she must live with you in that same house for over half the year, disregarding temporary absences.

And if your spouse can qualify as a head of household for a second child, he or she can also take advantage of those more favorable tax rates which demonstrates once again how working together to find a solution can work for both of you.