Your tax filing status has a major impact on what you’ll pay in taxes for the year.
Filing taxes isn’t like becoming a baseball fan — your status can change as your situation changes (but Yankee fans are fans for life).
In fact, you want your status to change as you move through life, because using the most accurate representation of your situation could save you thousands.
“In most cases, the filing status is dictated by whether you are married or not, and what dependents you have,” explains Brian Wynne, a certified public accountant. “Getting married is the big change for most people.”
Of course, taxes aren’t cut and dry, and no one is better qualified to help you determine the best filing status than your accountant or financial planner. If you experience one of the following common life changes, you may want to reach out to your most trusted resource and ask about the best filing status for your situation:
If you get married. Once you tie the knot, you have the options of Married Filing Jointly and Married Filing Separately.
If you get divorced. Post-divorce, you could file as Single or as Head of Household if you have a financially dependent child. To file as Head of Household, you must be unmarried or “considered unmarried,” which has its own host of qualifications.
If you become the caretaker of an elderly parent. Being financially responsible for a dependent — even a parent — could give you the option of filing Head of Household.
These aren’t the only changes that could affect your filing status. If, for instance, your spouse stops working, you have a child with a partner to whom you aren’t married, or your spouse passes away, you’ll want to look into that event’s impact on your filing status.
“If more than one status applies, you are allowed to choose the status that results in the lower tax,” says Wynne. “Any competent CPA should be able to tell you which status is most beneficial in your situation.”
And remember: Your filing status must reflect your status on the last day of the tax year. If you get married on January 1, 2015, you’re still filing Single for 2014 taxes.
If you’re interested in the nitty-gritty of tax filing statuses, check out the IRS website.
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