Choosing The Wrong Tax Filing Status Could Cost You Money

It's officially April, and with the arrival of spring comes the need to tackle your tax filing tasks. Every year, Americans log into their tax preparation service accounts and/or software packages to complete this annual obligation. One of the first pieces of information you'll need to provide involves your tax filing status. After populating the forms with your name, and other basic details, your tax software will then ask your marital status. For most tax filers, this question is fairly simple, and in 2024 a little over 47% of American households featured married couples.

Your status as a married person or a single filer can guide much of the following decision making tree within your tax filing process, but it's not the only thing to keep in mind. Those who aren't married will usually be classified as "single" filers by default. As a married filer, you have another decision: Whether to file jointly or separately. Depending on your particular situation, it might make sense to file separately some years and combine financial reporting in others. If you accidently (or intentionally) select the wrong filing status, your tax refund can be delayed, or you might even have to file an amended return that can throw a wrench into your plans for that refund check. The current wait time for amended returns can be up to 16 weeks while a standard original filing takes up to 21 days for a refund check to be deposited.

There's one alternative that many taxpayers can utilize when finalizing their financial reporting for the year. Instead of filing as a married person or a single taxpayer, if you care for a dependent you can opt to file your taxes with the status "head of household." For the typical American, marriage generally precludes your ability to file this status, but for those married to a foreign individual without tax status in the U.S. (specifically a "nonresident alien"), this avenue can be pursued. Also, for anyone tackling their tax reporting obligations without any crossover with a partner, selecting head of household for your filing status can be an important asset. 

This leaves specific married Americans, and unmarried individuals who have a child or care for another family member as eligible. The value found in this alternative filing status lies in its favorable tax bracket changes and a bump up of your standard deduction. Instead of a 2024 deduction figure of $14,600 (for single filers and separate married filers), heads of household get a $21,900 standard deduction. Plus, as head of household you can earn up to $63,100 before being moved into a higher 22% tax bracket — compared to just $47,150 for single filers. Without looking for creative tax deduction options, this one simple change –- if you're eligible to use it –- can make a huge difference in your tax liability, immediately expanding your refund potential.

Beyond your tax filing status, the financial circumstances you find yourself experiencing can also deliver eligibility for other benefits that often go unclaimed. Roughly 20% of people eligible to utilize the Earned Income Tax Credit (EITC) don't include this tax break in their filing.

The EITC is an important tax break for those who find themselves on the lower end of the financial spectrum. Depending on your income level, and the number of children you have, your tax credit can rise up to $7,830 (with three qualifying children and an AGI below $59,899 for single filers, head of household, widowed, and married filing separately, and $66,819 for joint filers). For many, this can put a monumental dent in the amount that might be owed to the government, or create a momentum shift that expands a refund check value by a significant margin. Leaving this asset on the table, and failing to explore your alternative filing status options while you plan your tax strategy, can be immensely wasteful and ultimately cost you significantly more.