Michael H. Lester, J.D., CPA
Business Management

1990 Westwood Blvd. #200
Los Angeles CA 90025
Phone: (310) 446-0088; Facsimile: (310) 446-0079

"TIP OF THE MONTH"
(February 1996)

Who Qualifies as "Head Of Household" for Federal Income Tax Purposes?

(And Why Should You Care?)

What is Head of Household Filing Status?

The Internal Revenue Code provides several different categories of filing status. These are: Single; Married Filing Jointly; Married Filing Separately; Head of Household; and Qualifying Widow(er) with Dependent Child. Head of Household status applies to certain taxpayers who take care of their relatives.

Why Should You Care?

If you qualify for Head of Household rates, you will pay less income tax than if you filed as Married Filing Separately or as Single. This is because Head of Household rates are lower than either Married Filing Separately rates, or Single rates. Head of Household filers who do not itemize also get a higher standard deduction than Single filers or Married Filing Separately filers.

Who Qualifies for Head of Household Filing Status?

You qualify for Head of Household rates if you are unmarried or considered unmarried on the last day of the year, and you have paid more than half the cost of keeping up a home for yourself and a qualifying person for more than half the year.

Who is a Qualifying Person?

Almost any relative can be a qualifying person, including children, whether natural or adopted, parents and grandparents, siblings, aunts and uncles, and many in-laws and step-relatives. Special rules apply in certain situations. Foster children can qualify if they are your dependent.

If your dependent parent does not live with you, you must pay more than half the cost of keeping up a home that was their main home for the entire year, such as a rest home or home for the elderly.

You can still meet the test even if the qualifying person has a temporary absence due to special circumstances, such as illness, education, business, vacation, and military service, if you continue to maintain a household in anticipation of their return.

What Costs Count Toward Keeping Up a Home?

Rent, mortgage interest, taxes, homeowner's insurance, repairs, utilities, and food eaten in the home count as costs toward keeping up a home.

The cost of clothing, education, medical treatment, vacations, life insurance, transportation, or the rental value of a home you own do not count. The value of your services do not count either.

Who is "Considered Unmarried"?

You are considered unmarried on the last day of the tax year if you meet four tests.

1) You file a separate return.
2) You paid more than half the cost of keeping up your home for the tax year.
3) Your spouse did not live in your home during the last 6 months of the tax year.
4) Your home was the main home of your dependent child for more than half the year. (Your child need not be your dependent in certain cases.)

How Do You Claim Head of Household Status?

Check the box on line 4 of Form 1040 or Form 1040A, and use the Head of a household column of the Tax Table or Schedule Z of the Tax Rate Schedules, to compute your tax.

Caveats

This is only a general discussion of some of the rules about Head of Household filing status. There are more details, special rules, and exceptions not discussed here. You should consult a tax professional if you are unsure whether or not you qualify for Head of Household filing status.

As always, general advice may not apply to your specific situation, and rules change constantly, so you should get a professional opinion before you rely on this information.

Prior Months' Tax Tips

Read the "Tip of the Month" for January 1996. "Save Taxes. Open an Individual Retirement Account."
Read the "Tip of the Month" for December 1995. "Economic Reality Audits. Should You Be Afraid?"
Read the "Tip of the Month" for November 1995. "Should You Buy or Lease Your Next Car?"
Read the "Tip of the Month" for October 1995. "Save Taxes! Put Your Junior Programmers to Work"
Read the "Tip of the Month" for September 1995. "California Statutory Wills"

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Michael H. Lester, J.D., CPA Business Management