Head of Household Tax Filing Status after DivorceThe Value of Filing as "Head of Household" Filing as Head of Household ("HOH") can save up to $8,000 per year over filing as Single. Therefore, it is critical to evaluate the post-divorce tax filing status for each party when negotiating a settlement. This requires thought and agreement beyond determining who will claim a child as a dependent. Most people are under a misconception that claiming a child as a dependent entitles them to file HOH. To qualify, you must satisfy all of the following requirements:
As indicated above, a taxpayer does not need to claim a dependency exemption to file HOH. So, for a custodial parent, even in years when you "give" (by completing IRS Form 8332) the dependency exemption to you ex-spouse, you can still file HOH. The key to ensuring Head of Household tax filing status generally lies in the custody arrangement. If an agreement provides joint custody, it may be helpful to indicate in the agreement which child lives with which parent for more than one half of the year. If there are two children, both parents can qualify as HOH, so long as one child lives with one parent more than half of the year, and the other child lives with the other parent more than half of the year. If audited, the parents will need to provide evidence that the dependent child spent more than 182 nights with the appropriate parent. Note that if one qualifies as Head if Household, they generally qualify to benefit from any related "dependent care credit" and/or "Earned Income Tax Credit" that may be applicable. The party taking the dependency exemption generally qualifies to benefit from the "child tax credit" and any extra stimulus rebates that may be provided in a given tax year. The next time you discuss "who claims the kids" - expand your discussion to include the impact on filing status and the related tax credits to ensure your clients maximize their tax benefits. Return to top of Head of Household Tax Filing Status Copyright 2009. Article by Noah B. Rosenfarb, CPA, ABV, PFS, CDFA Noah is Managing Director of Freedom Divorce Advisors (www.FreedomDA.com), a boutique CPA firm for divorcing women. He created The LIBERTY Agenda, a patent-pending process to help high net worth women deal with the financial challenges of divorce. Noah is a frequent speaker and proud sponsor of www.DECNJ.org, a non-profit organization that educates divorcing women. You can also click the following link to read more articles by Noah Rosenfarb. In addition to the head of household tax filing status, you also need to consider who claims the children as dependents. The following articles shed more light on some of the tax issues that come up during and after divorce: Divorce Home / Articles / Divorce
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