Tax Advantages for Separated Couples

Head of Household Status

If you provided more than half the support of a dependent (a child or a relative) and more than half the upkeep of a household, and were considered unmarried on the last day of the tax year, you can file as head of household. This filing status gives you a higher standard deduction than the single filing status and your tax rate will be lower. Even if you are still legally married, you can be considered unmarried for head of household purposes if you did not live with your spouse the last six months of the year.

If you file as head of household, you are eligible for the child tax credit, the dependent care credit and the earned income credit. For these credits, your income limits are higher than if you were filing married filing separately. Even if your filing status is single, you may still be eligible for the earned income credit or have a lower tax rate because you are not including the income of your spouse.

Sometimes the parents who are not the primary caregiver of their children can claim them as dependents to be able to file as head of household and to claim a dependency exemption. To receive this benefit, the non-custodial parent requires the permission of the custodial parent either in a divorce or separation agreement signed prior to 2009 or a signed form 8332 that releases the claim to the exemption.

Some couples who are still legally married on the last day of the tax year may choose the married filing separately status if one spouse has a past-due tax bill or other tax liabilities. If you choose this status, your combined tax will be more than any other filing status. Plus, you will not be eligible for many tax credits, including the earned income tax credit. Instead, file a joint return but include the injured spouse form (form 8379) to make sure only the spouse who owes a past-due amount will be liable for it.