Tax Tip of the Week
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Pick the best filing status
For the week of
March 12, 2001
Understanding your filing status choices and selecting the one that is best for
you can cut your tax bill. Your filing status determines your tax bracket. It also sets the income level at which
you become ineligible for certain tax benefits, such as deductible IRAs and the child tax credit.
Your filing status is determined by your marital status on the last day of the year. It's pretty easy to determine
whether you are married or single on the last day of the year… or is it? What if you are widowed? What if you are
married, but legally separated from your spouse?
You must choose between the following filing statuses: single, married filing jointly, married filing separately,
or head of household. There may be more than one choice that could apply in your situation.
Let's compare the tax bill under each filing status for a taxpayer with $40,000 of taxable income for 2000.
Single $7,788
Married filing jointly $6,000
Married filing separately $8,350
Head of household $6,631
A single parent with a qualifying child could save $1,157 by claiming head of household
status rather than filing as single. A legally separated taxpayer could save $1,719 if he or she qualified to claim
head of household status rather than choosing married filing separately status.
Selecting the correct filing status isn't always easy. You should consider both your tax situation and your personal
situation before selecting a filing status on your return. If you have questions about which filing status is best
for your circumstances, give us a call.
Click here to view previous tax tips.
"Tax Tips" are published weekly to
provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders,
and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
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