Whenever you are subscribing to a new phone plan, or to Netflix/Prime Video, you are given the choice of a few different plans. The variables could be the number of users, the number of screens, the type of content, and most importantly, the cost! This is very much like deciding on your filing status. It may not be as much fun, but definitely more important.
Knowing which filing status you should opt for would help you in reducing taxes since it is your filing status that will determine your tax rates. You must choose one of these while filing your tax return. Your choice will influence the amount of tax you pay, the deductions you would be eligible for, and the amount of standard deduction you would be allowed.
There are five filing statuses you can choose from. More than one of these options may apply in your case. It is not necessary that you use the same filing status this year that you used the previous year. Events during the tax year have to be taken into account. Subject to certain conditions, you can choose the one that offers you the best tax outgo. The five statuses are: single, married filing jointly, married filing separately, head of household, and qualifying widow(er). It is your marital status as of December 31 of the tax year (or the last day of your tax year) that primarily defines your filing status.
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Filing status: Single
You can file under this status if you are single and unmarried as on the last day of the tax year. You would also be considered unmarried for the whole year if you are divorced under a final decree before the end of the tax year. Your filing status will be single if you were widowed before the beginning of the tax year and you did not remarry till the end of the tax year and you have no dependents. Your tax bracket would be:
| Single Filer | Tax Rate | Income Range for 2021 | Income Range for 2022 |
| 10% | $0 – $9,950 | $0 – $10,275 | |
| 12% | $9,951 – $40,525 | $10,276 – $41,775 | |
| 22% | $40,526 – $86,375 | $41,776 – $89,075 | |
| 24% | $86,376 – $164,925 | $89,076 – $170,050 | |
| 32% | $164,926 – $209,425 | $170,051 – $215,950 | |
| 35% | $209,426 – $523,600 | $215,951 – $539,900 | |
| 37% | Over $523,600 | Over $529,900 | |
| Standard Deduction | $12,550 | $12,950 |
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Filing status: Married filing jointly
If you are married, you can only file either as ‘married filing jointly’ or ‘married filing separately. Married filing jointly affords you the most tax savings and several potentially valuable tax breaks as you would fall in a higher tax bracket with a higher standard deduction. Your tax bracket would be:
| Married filing jointly | Tax Rate | Income Range for 2021 | Income Range for 2022 |
| 10% | $0 – $19,900 | $0 – $20,550 | |
| 12% | $19,901 – $81,050 | $20,551 – $83,550 | |
| 22% | $81,051 – $172,750 | $83,551 – $178,150 | |
| 24% | $172,751 – $329,850 | $178,151 – $340,100 | |
| 32% | $329,851 – $418,850 | $340,101 – $431,900 | |
| 35% | $418,851 – $628,300 | $431,901 – $647,850 | |
| 37% | Over $628,300 | Over $647,850 | |
| Standard Deduction | $25,100 | $25,900 |
You can use this filing status if –
- you and your spouse are married and living together, and have agreed to file jointly or;
- have been living together under a common law marriage recognized by the state where you live or;
- you and your spouse are living apart but not legally separated under a final decree of divorce.
If your spouse died during 2021, you will be considered married for the whole year. Even if your spouse died during 2022 but before you were due to file the tax return, you need to be under this status.
On a joint return, you and your spouse get to combine both your incomes and you will be entitled to all the allowable combined expenses. Both of you don’t need to be earning to file and avail yourself of the lower tax under this status. Generally, it is expected that both of you affix your signatures on the return.
Filing jointly carries some responsibilities. Both of you should be following the same accounting period and should have paid your individual taxes through withholding or otherwise correctly. If your spouse did not pay tax correctly, you would have to take responsibility and any refund due to you would be adjusted for your spouse’s shortfall in tax. The same would be with any penalties incurred.
You can however seek relief from the joint responsibility by (a) requesting for the innocent spouse relief – a provision of U.S. tax law – allowing a spouse to seek relief from tax, interest, and penalties resulting from underpayment of tax by a spouse by filing Form 8857 or (b) equitable relief which is granted by a court requiring one party to either act or refrain from taking an action or (c) separation of liability – this is available only to joint filers who have not lived together for the12 months ending on the date the election for this relief is filed i.e., who are divorced, widowed or legally separated.
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Filing status: Married filing separately
You can opt for this filing status if you do not want to take responsibility for your spouse’s income or if you find that this status will benefit you in the form of lower taxes. You will need to provide only your income details, credits, and deductions in your return. It will help if you calculate your taxes under both statuses and find out which would result in an advantageous tax situation. Your tax bracket would be the same as that of a single filer.
You however would lose out on certain benefits accruing on filing jointly. When filing separately, you must include your spouse’s information on your returns. If one of you itemizes deductions, then the other spouse cannot take the benefit of the standard deduction. The other spouse necessarily should also itemize deductions. Further, you will not be able to avail yourself of the full benefit of child care and dependent benefits, adoption expenses, earned income credit, education credits, etc.
You will need to be fully aware of the tax intricacies of separate incomes if you are living in community property states viz., Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin while filing under this status.
You can change your filing status from ‘filing separately’ to ‘joint filing by filing an amended return in Form 1040-X. However, this can be done only within three years from the due date of the separate returns (without any extensions). This includes not only separate returns filed by you or your spouse claiming married filing separately but also single filing or head of household filing status.
Please note that once you have filed a joint return, you cannot choose to file separate returns for that year after the due date of the return. You are not precluded from switching over from filing jointly to separately or vice versa next year.
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Filing status: Head of Household
You can file under this status if you are unmarried or considered unmarried on the last day of the year and you are supporting at least one qualifying dependent by contributing more than half the cost of keeping up a home for the year. Real estate taxes, insurance on the home, interest on a mortgage, rent, utilities, food, and other household expenses constitute expenses for maintaining the house. You cannot include the cost of clothing, education, medical treatment, etc., nor can you include the value of your or any other household member’s services. You should be filing a separate return such as single, married filing separately, or head of household. You are also considered unmarried for purpose of this filing status if your spouse was not living in your house for the last six months of the tax year (without counting temporary absences).
A qualifying person would be a child under 19, or under 24 if he/she is a student, who lives in your house for more than half the year. Your mother or father would qualify but they do not have to live with you so long as you can prove that you provided at least half with their support. Your siblings and some other relatives also count if you provide at least half their support. The IRS has prescribed detailed tests to establish the qualification of dependents.
The tax brackets for a head of household are:
| Tax Rate | Income Range for 2021 | Income Range for 2022 | |
| Head of Household | 10% | $0 – $14,200 | $0 – $14,650 |
| 12% | $14,201 – $54,200 | $14,651 – $55,900 | |
| 22% | $54,201 – $86,350 | $55,901 – $89,050 | |
| 24% | $86,351 – $164,900 | $89,051 – $170,050 | |
| 32% | $164,901 – $209,400 | $170,051 – $215,950 | |
| 35% | $209,401 – $523,600 | $215,951 – $539,900 | |
| 37% | Over $523,600 | Over $539,900 | |
| Standard Deduction | $18,800 | $19,400 |
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Filing status: Qualifying widow or widower
You can file your return as a qualifying widow(er) if you were entitled to file (but need not have filed) a joint return with your spouse for the year your spouse died. For the next two years, you can continue to use this status for filing your return except that you should have a dependent child staying with you. You should have paid more than half the cost of keeping up a home for the year. For the year 2021 return, you can continue to use this status if your spouse died in 2019 or 2020 and you did not remarry as of the last day of 2021.
This filing status allows you to use joint return tax rates and the highest standard deduction amount (if you don’t itemize deductions). You cannot however file a joint return.
While this is a simplified version of the filing statuses, there are conditions that you need to be aware of, like in the case of who can be a qualified dependent, etc. The IRS has provided a detailed list of ifs and buts in this regard. There are quite a few details that you need to keep in mind at the end of the tax year. It would be ideal to seek the services of a CFO consulting service so that your return can be processed without a hitch.