How Do I Choose the Right Tax Filing Status?

When it comes time to file your taxes, one of your key goals is likely to make sure you pay the least amount possible. One of the key things that affects how much you pay is your tax filing status.

That may lead you to wonder: How do I choose the right tax filing status? The status you choose determines not only which tax bracket applies to you, but also which deductions and credits you may be eligible for. Here’s what you need to know about tax-filing statuses.

Understanding the 5 tax filing statuses

The Internal Revenue Service (IRS) requires each individual to choose among five filing statuses, which it uses to determine the rate at which your income is taxed.

Single: This is for individuals who are unmarried, legally separated or divorced from their spouse on the final day of the year in which they are filing their taxes.

Married filing jointly: This status applies to individuals who are married or who were widowed during the filing year and wish to file a joint tax return for that year.

Married filing separately: This option is for married individuals who choose to file their tax returns separately either for personal or financial savings reasons.

Qualifying widow(er) with dependent child: This status is reserved for surviving widows or widowers who care for a dependent child. An individual can typically claim this status for two years following the death of the spouse, and it generally affords the filer a more favorable tax rate and standard deduction.

Head of household: To qualify for this status, individuals must meet a specific set of requirements, which include: being unmarried on the final day of the year in which they are filing their taxes, having paid more than half the cost of owning and maintaining a home for the year, and having a qualifying person (such as a child or other dependent) live in the home for at least half the year. 

If you’re still unsure, the IRS has an online interview tool that can help.

Why choosing correctly is important

Because your filing status indicates the rate at which the IRS will tax your income, it can have a major impact on how much you pay in taxes each year. For instance, when you choose the filing status of single, you will pay 10 percent in tax on income up to $9,950 in 2021. The percent you owe on income increases on each additional dollar. But if you file as married filing jointly, the percent of your income taxed above 10 percent doesn’t start until $19,900.

Additionally, your filing status will affect your standard deduction. For example, in 2021, those filing as single or filing as married, filing separately, qualify for a standard deduction of $12,550. Married couples who file jointly qualify for a standard deduction of $25,100 and those filing as a head of household qualify for a standard deduction of $18,800.

Your filing status may also impact which deductions you qualify for (if you choose to itemize instead of claiming the standard deduction) as well as your eligibility for certain tax credits.

How to choose

Typically, your filing status will be determined by your marital status and overall family situation on the final day of the filing period.

“The big event that tends to cause the most changes is a changing marriage situation,” says Phil Roemaat, Vice President of Advanced Planning at Northwestern Mutual. “For example, if an individual who previously filed as single was to get married, they now have the option to file as married filing jointly. Or, a surviving spouse may find their filing status changing from married filing jointly to qualifying widow(er), single, or head of household, depending on their situation.”

It's also possible for you to qualify for multiple filing statuses. For example, a married couple may choose to file jointly or separately for either straightforward or complex reasons. In these cases, the IRS advises individuals to choose the status that gives them the lowest tax rate. If you are unsure about which option is best for you, consider contacting a financial advisor and a tax professional for guidance.

This article is not intended as legal or tax advice. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting or tax adviser.