By Capt. Leigh Leduc, Tax Center OICMarch 16, 2018
The filing status you choose this tax season may greatly influence the amount of your refund. Sometimes you can make a selection on your filing status, depending on your personal situation, but your filing status is not necessarily as simple as your marital status.
The most common, and almost always the best, tax filing status for married couples is Married Filing Jointly.
A married couple can file their taxes as Married Filing Jointly if they were married on the last day of the tax year -- Dec. 31, 2017, for this tax season -- or if your spouse passed away during the year. Both spouses must sign the tax return, or digitally sign using a PIN number if e-filing, or have a valid tax year-specific power of attorney for the other spouse in order to use Married Filing Jointly. Both spouses are responsible and liable for the accuracy and completeness of the information on the tax return.
Married Filing Jointly is the most common and almost always the most advantageous because it typically provides the largest refund. The standard deduction is around $12,000 for Married Filing Joint, as opposed to around $8,000 for Married Filing Separately. This means that more of your money is subject to tax if you file separately.
The tax brackets for Married Filing Jointly are also the most favorable for a married couple. However, if your spouse refuses to fill out a joint tax return, then you cannot use Married Filing Jointly.
Unlike Married Filing Jointly, Married Filing Separately typically offers the worst tax status resulting in a higher tax liability and lower refund. Most married couples should avoid Married Filing Separately. When using Married Filing Separately, neither spouse can get the benefit of several deductions and credits, such as the Earned Income Credit, Child and Dependent Care Credit or Education Credits. Also, the tax brackets for Married Filing Separately are much less favorable to the taxpayer.
Despite all of the disadvantages, there are some rare cases where Married Filing Separately may make sense. For example, if you or your spouse owe unpaid taxes or back child support, you might want to file separately. However, you could also try submitting an injured spouse form, which would allow one of you to get a refund, if accepted.
If you and your spouse are both high income, you might also consider filing separately. However, for high income earners, there might be no way to avoid owing if you do not withhold enough taxes, or if your income is simply just too high. You should contact a tax professional, such as the Fort Knox Tax Center, to determine if Married Filing Separately makes sense for your particular situation.
A common, but often misused, status is Head of Household. Head of Household can be used if you are single, paid more than half of the cost of keeping up your home for the year, and a "qualifying person" such as a child or a dependent lived with you in your home for more than half the year. You can also file Head of Household if you were married at the end of the year, lived apart from your spouse for all of the last six months of the year (with certain exceptions), you file separate from your spouse, you paid more than half the cost of keeping up your home for the year, your home is the main home for your child, stepchild or qualifying foster child for more than half the year, and you claim an exemption for the child.
If you qualify as Head of Household, you can claim all credits and deductions for which you are eligible, which you cannot do Married Filing Separately, you get a larger standard deduction than if you are Single or Married Filing Separately, and the tax brackets are more favorable than Single or Married Filing Separately, resulting in lower tax liability. This is typically the most advantageous filing status for someone who qualifies. However, it is subject to greater scrutiny from the IRS because of this.
Qualifying Widow(er) allows certain surviving spouses to retain the benefits of filing jointly. This status only applies if your spouse passed away in the past two tax years, a dependent child or stepchild lived in your home all year, along with other qualifications.
The default filing status is Single. If none of the above tax statuses apply to you, and you were not married on the last day of the year, then you are Single.
Finally, one special status unique to Kentucky returns is Married Filing Jointly on a Combined Return. This status breaks up your assets between the couple and treats each as an individual for tax purposes, while maintaining the benefits of the married status. It can potentially result in a lower tax burden, depending on your situation.