Tax savings strategy and filing status: gain insight into the filing status that will result in the lowest amount of tax for you.
It is important for you to determine the filing status that makes the most sense for you. This is because your filing status affects how you should file your tax return and the amount of tax that you owe.
Let’s review the filing statuses that are available to you and the amount of tax that you may save.
GENERAL
For instance, the federal tax administration uses your filing status to determine the following deduction, tax credits:
- Federal income tax return: whether you should file a return;
- Individual income tax return: the type of tax return form that you need to use;
- Refund: whether you should file a tax return to receive a refund;
- The amount of standard deduction that you’re entitled to;
- Tax credits: whether you’re eligible for certain tax credits;
- The amount of tax that you should pay.
THE FIVE FILING STATUSES
You may qualify for one or more of the following five filing statuses:
Single
Your filing status is single if as of December 31,
- You were never married.
- You were divorced and your divorce was final.
- You were legally separated under a divorce or separate maintenance decree governed by state law; or
- You were widowed last year and didn’t remarry before the end of the tax year.
Married filing jointly
Your filing status is married filing jointly if:
- You were married at the end of the tax year. It doesn’t matter whether you live with your spouse at the end of the tax year or not.
- Your spouse died during the tax year, and you didn’t remarry during the tax year.
- You were married at the end of the tax year and your spouse died the following year before filing a tax return for the tax year.
Married filing separately
If you’re married, you can choose to file a separate tax return if that saves you tax compared to filing a joint tax return.
Head of household
Your filing status is head of household if you were unmarried for this status purpose and provide a home for certain other persons.
Example: you are married but live apart from your spouse for the last 6 months of the tax year. In addition, you paid over half the cost of keeping up a home that was the main home during the tax year of one of your parents whom you can claim as a dependent.
Qualified widow(er) with dependent child.
Your filing status is qualified widow(er) if you meet the following requirements:
- Your spouse died during one of the previous two years.
- You have a child or stepchild (not a foster child) whom you claim as a dependent or could claim as a dependent, and
- You meet other conditions.
If you’re eligible for more than one filing status
If you’re eligible for more than one filing status, the Internal Revenue Service recommends that you carefully review your options to choose the one that saves you the maximum amount of tax.
If you’re eligible for one filing status
If you’re eligible for only one filing status, you should review your tax situation after a major life event like marriage or divorce.
Individual income tax returns are the main returns that the IRS processes. As of October 28, 2022 the IRS received 164 million individual income tax returns that pertain to the 2021 tax year. The federal tax agency issued 109 million refunds for a total amount of $345 billion. The average amount of the refund is $3,253.