Choosing the Right Tax Filing Status Can Save You Big Bucks
Many Americans seek ways to minimize their tax bills as the tax season approaches. Your filing status is one of the most critical factors affecting your tax liability. Your filing status determines which tax forms you must fill out, your eligibility for certain tax credits, the tax deductions you can take, and other tax benefits. Choosing the correct filing status can make a big difference in your tax return, so it’s essential to understand the five federal tax filing statuses and how they affect your tax liability.
The five federal tax filing statuses are a single filer, married filing jointly, married filing separately, head of household, and qualifying widow or widower with dependent child. Each filing status has different requirements and tax implications, so choosing the correct status for your situation is essential. For example, if you’re legally married, you’ll benefit from declaring married filing jointly status on your tax return. This status allows you to combine your income and take advantage of various tax credits and deductions. If you’re unmarried but supporting a dependent, you may qualify for head of household filing status or the tax benefits of qualifying widow or widower status. You’ll likely need to file as a single taxpayer if you’re available and can’t claim any dependents.
Choosing the correct filing status is crucial because it affects your standard deduction amount, the child tax credit or earned income credit you’re eligible for, and many other tax credits that could significantly lower your taxable income and, ultimately, the tax you pay. To ensure you choose the correct filing status for your federal tax return, start by determining your marital status at the end of the year. If you need help deciding which filing status to choose, you can use the IRS filing status tool to confirm your filing status or consult with a tax expert.
If you realize later that you’ve chosen the wrong filing status, don’t worry. You can amend your tax return anytime, including changing your filing status. However, this can alter your tax liability and result in an enormous tax bill or refund. The IRS allows taxpayers to use Form 1040X to go back up to three tax years to make adjustments.
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