Filing status is one of the first questions asked on the standard IRS Form 1040 for individual tax returns, appearing just below the basic identifying information of name, address and Social Security number. Head of Household is one of five options, including single, married, married filing separately and widow(er) with dependent child. A married person cannot file as head of household unless he has lived apart from his spouse for more than six months, or was legally separated or divorced before the last day of the year.
Head of Household filers are considered unmarried and have at least one qualifying person for whom they provided more than half of the financial support during the tax year, while also paying more than half the cost of keeping up a home. The cost of keeping up a home includes property taxes, utilities, rent, insurance, repairs and food consumed on the premises (see Resources). Anyone claimed as a dependent by someone else cannot file as head of household.
There are two types of qualifying persons relevant to Head of Household status. Dependent children are those immediate relatives under a certain age (under 19 unless they are full time students or disabled) who lived in your household for more than half the year and who generated less than half of their own financial support. The rules for other qualifying persons are a bit more strict. To be a “qualified relative,” the person does not have to be related to you if they lived with you for the entire year (not including spouses), but must have earned less than a certain benchmark income and must received more than half of their financial support from you.
After a divorce, former spouses can split the tax benefits of their dependent children by having one file as Head of Household (taking the higher standard deduction), while the other claims the child as a dependent (claiming the child tax credit). Only one parent, however, can meet the residency requirement to file as Head of Household (the child must reside with them for more than six months out of the year), and must file Form 8332 to release their claim to the exemption to their ex-spouse.
The taxpayer filing as Head of Household has a substantially higher standard deduction than single filers. This deduction amount directly reduces the taxpayer's adjusted gross income and therefore her overall income tax liability. The higher the tax rate of the individual, the larger the savings created by the standard deduction in absolute terms.
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