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• Head of household is a federal filing status for unmarried taxpayers with qualifying dependents.
• Single parents and caregivers may be eligible to file as head of household.
• They get a bigger standard deduction than single filers and often lower tax rates.

Your filing status is one of the most important decisions you make when you do your taxes each year. For unmarried individuals who have dependents, filing as head of household rather than single could lead to big tax savings.

What is the head of household filing status?

All taxpayers must choose a filing status on their federal tax return, Form 1040. The options are single, married filing jointly, married filing separately, head of household, and qualifying surviving spouse.

The head of household filing status is for unmarried taxpayers who are financially responsible for a dependent, says Rachael Burns, a certified financial planner whose California-based firm, True Worth Financial Planning, services divorcées and widows.

“Divorced or otherwise single parents are great examples of someone who may benefit from the head of household status,” she says.

In 2021, the latest year for which IRS data is available, only 13% of taxpayers — about 21.2 million people — filed as head of household, and most had low to moderate income. More than 9 in 10 head of household filers made less than $100,000 and 7 in 10 made less than $50,000.

Importance of choosing the correct filing status

Your filing status determines the size of your standard deduction and which tax brackets you use. Your status doesn’t have to be the same from year to year, so consider consulting with a tax professional if you’ve experienced a divorce, birth, or other household change that may impact who you claim as a dependent.

“Your filing status impacts how much tax you pay, so it’s important you choose the one that’s best for you,” Burns says. If you qualify for the head of household filing status, it can help you unlock lower tax rates and a bigger standard deduction than filing single, she adds.

Filing status also helps determine your eligibility for tax credits and deductions, since different income thresholds and phase-outs apply for each status.

Quick tip: The IRS offers an online tool to help taxpayers choose the correct filing status.

Eligibility requirements

Marital status

Taxpayers have to be single, legally separated, or divorced by December 31 to use the head of household filing status. If you were still legally married, you may be able to qualify if you and your spouse lived separately for the last six months of the year. Otherwise you’ll need to choose married filing jointly or married filing separately.

Maintaining a home

Head of household filers must prove that they paid more than 50% of the cost of maintaining a home for a dependent during the year, says Derrick Doerr, a CPA and vice president at financial-services firm Nepsis in Minneapolis. That can include expenses like groceries, rent or mortgage payments, and utilities.

Qualifying dependents

Lastly, the qualifying dependent needs to live with the taxpayer for more than half of the year.

“There is a wide range of dependents that can qualify,” Doerr says, including foster children, stepchildren, adopted children, minor or adult siblings, and grandchildren. A parent can also qualify as a dependent but does not need to live with the taxpayer.

Tax benefits of filing as head of household

Higher standard deduction

A standard deduction is available to every taxpayer who does not itemize their deductions.

Head-of-household filers receive a standard deduction that’s larger than single filers but smaller than married joint filers. The amounts are adjusted each year to reflect cost-of-living changes.

Lower tax rates

The same income tax rates apply to all filing statuses, but the bands of income for each one vary.

In general, head of household filers have more leeway than single filers — meaning they can earn more than single filers before jumping to the next highest tax rate.

For example, a single filer with taxable income of $60,000 would have a marginal tax rate of 22%, while a head of household filer at the same income level would have a top tax rate of just 12%. As a result, the head of household filer’s tax liability is about $1,380 lower than the single filer’s with the same income (before any credits are applied).

For incomes above about $100,500, the tax brackets for both tax statuses are virtually the same.

Credits and deductions

Head of household filers may be eligible for credits that help offset the cost of caregiving, such as the Child Tax Credit or the Child and Dependent Care Credit. The Earned Income Tax Credit is available to all filing statuses, but those with children can get a larger amount.

For 2024 taxes, the Child Tax Credit is worth up to $2,000 per qualifying child. The maximum income you can have to qualify for the credit ($200,000) is the same for all filing statuses, except married joint filers ($400,000). Up to $1,700 of the credit is refundable.

There’s no maximum income threshold for claiming the Child and Dependent Care Credit, which allows you to write off some expenses associated with the care of a child under 13 or a dependent of any age who is mentally or physically disabled. Once your adjusted gross income, or AGI, reaches $43,000, regardless of filing status, your maximum credit is either $300 for one qualifying dependent or $600 for two or more.

How to claim head of household status

Gathering necessary documentation

Filing taxes as head of household can be more involved than filing as single. You’ll need to provide supporting documents to confirm your marital status and the eligibility of your dependent.

To prove qualifying dependency status, you need to provide the following with your tax return:

• Birth certificates or other official documents of birth or letters that verify your relationship
• School, medical, daycare, or social service records that verify your address is the same as the dependent (unless they are your parent)

To prove that you paid 50% or more of the costs of keeping up a home for your dependent, attach:

• Rent receipts
• Utility bills
• Grocery receipts
• Property tax bills
• Mortgage statements
• Repair bills

Common scenarios and examples

Single parents

A person who has sole legal and physical custody of a child (also known as the custodial parent) will typically qualify for head of household status. The child can also be a stepchild, foster child, or adopted child.

Divorced or separated individuals

Divorces where children are involved can make filing taxes a bit tricky. Generally, only one parent can file as head of household in a given tax year and also claim deductions and credits for the dependent.

“If you have multiple children with your ex, there’s a possibility that both parents can file as head of household,” Burns says. Each parent must pass the residency and support tests for each dependent they claim.

Supporting relatives

Nieces, nephews, siblings, grandchildren, parents, step-parents, and in-laws may all be considered qualifying dependents for purposes of the head of household filing status.

The same residency and relationship tests apply as for children of the taxpayer, but there’s an exception for parents: They do not need to have lived with you, but you must still have covered at least 50% of the cost of keeping up a home for them, including nursing care or a retirement home.

Potential challenges and how to overcome them

Proving eligibility

Doerr says there may be an increased audit risk for those filing as head of household versus single. Be prepared for the IRS to ask for additional financial records or verification.

“Head of household definitely can draw IRS scrutiny and the IRS can definitely scrutinize claims, especially in the case of divorce or shared custody, requiring you to provide detailed documentation,” Doerr says.

Understanding the rules

If you’re unsure whether you qualify for head of household status, consult with a tax advisor. And if you’re dealing with an ex-spouse, be sure to communicate about your tax-filing plan before either party files.

Estimate your taxes

FAQs about filing as head of household

Can I file as head of household if my spouse and I are still married?

Yes, you can file as head of household if you are legally separated but still married and have a qualifying dependent. You can also file as head of household if you're still married but live separately for the last six months of the year. Ex-spouses cannot, however, claim the same child in the same tax year.

What counts as maintaining a household for head of household purposes?

Maintaining a household for head of household purposes means providing more than 50% of the cost of housing, food, and other essential expenses.

How do I know if my dependent qualifies me for head of household?

Your dependent can qualify you for head of household status if they lived in your home more than half the time, and you paid more than half the cost of keeping up the home.

What should I do if my filing status is challenged by the IRS?

If your filing status is challenged by the IRS, it is likely related to your dependent. Be prepared to provide additional records or receipts to prove that you financially supported and housed the dependent for more than half of the year.

Are there any exceptions to the general head of household rules?

Yes, there is an exception to the general head of household rules: A parent can be a qualifying dependent even if they didn't live with you. But you must have paid at least 50% of the cost of maintaining their primary home, whether that's a nursing home, retirement community, or another living situation.

The offers and details on this page may have updated or changed since the time of publication. See our article on Business Insider for current information.

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate tax products to write unbiased product reviews.

• Tax-exempt interest comes mainly from municipal bonds and U.S. Treasury bonds.
• Interest from Treasury bonds, bills, and notes is federally taxed.
• Muni bond interest is not federally taxed and may be exempt from state and local taxes.

There are plenty of reasons to buy bonds. Many investors are attracted to municipal bonds and U.S. Treasury bonds, in particular, for their tax-exempt status.

"Individuals are always looking for a return on principal, and so tax-exempt interest is a very appealing item to individuals, especially those who live in zero-income-tax states," says Danny Moore, a certified public accountant and managing partner of tax at Galway Family Office.

Tax-exempt interest refers to interest that's excluded from your gross income calculation at the federal level, the state/local level, or both. Here's how it works.

Tax-exempt interest from municipal bonds

What are municipal bonds?

Municipal bonds, or muni bonds, are typically issued by state and local governments and U.S. territories. They finance government operations and projects, such as building schools or restoring roads.

The two main types of muni bonds are revenue and general obligation. Revenue bonds can be slightly riskier because repayment relies on revenue from a specific project or source. Repayment of general obligation bonds comes from the issuing state or local government, which can raise taxes to pay off the bonds if needed.

Tax advantages

Usually, bondholders receive two interest, or coupon, payments a year, which are not subject to federal income tax. After a set period of time, bondholders receive their original investment back.

Investors can buy muni bonds from the state or locality in which they reside, or from another state or locality. Typically interest income from muni bonds — or muni bond funds — issued by your home state is not taxable there.

Risks and considerations

Your muni bond interest income may not be fully tax-exempt at home if you buy an out-of-state bond, says Derrick Doerr, a CPA and vice president at financial-services firm Nepsis in Minneapolis.

State rules vary, but generally, the interest you earn from an out-of-state bond can trigger taxes in your home state. Exceptions include Washington D.C. and some states with no income tax, such as Florida.

Also, Doerr notes, "Municipal bonds are generally low risk, but not risk-free." One risk is that muni bonds can be called early by the issuer. This often happens when interest rates fall, and can leave an investor choosing from lower-paying alternatives.

If you're a high earner, there's something else to consider: Interest from private activity bonds, a type of muni bond issued by a private business and not a government entity, may not be tax-exempt if you pay the Alternative Minimum Tax (AMT). AMT may apply to individuals with incomes over $609,350 or married couples filing jointly with incomes above about $1.2 million.

Note: The U.S. Securities and Exchange Commission recommends reading official statements and disclosures from bond issuers and reviewing trade prices of municipal bonds you are considering buying.

Tax-exempt interest from U.S. Treasury Securities

What Are U.S. Treasury Securities?

Tax-exempt interest income can also come from U.S. Treasury Securities. Interest is paid semiannually and subject to federal taxation, but exempt from state and local taxes.

Treasurys are backed by the federal government and are categorized by their maturities, or how long it takes to return your original investment (principal). Bills mature within a year, notes mature within 10 years, and bonds mature in 20 or 30 years.

Treasury Inflation Protected Securities (TIPS) are a type of Treasury bond that protects your investment from inflation. They're available in terms of five, 10, or 30 years. The interest rate is fixed, and semiannual payments are only federally taxable, but your principal can fluctuate.

Interest earned from Series EE and Series I Savings Bonds are also exempt from state and local taxes. Interest, which is collected at maturity or whenever you cash the bond, could be exempt from federal taxation if you use the proceeds for qualified higher education expenses, though several rules apply.

Tax advantages

Treasurys produce fixed interest that's not subject to state or local taxes, offering predictable income for bondholders.

For T-bonds, bills, and notes, you have to include the interest in your federal gross income each year that you collect it. For savings bonds, interest isn't paid until the bond is redeemed, so you have the choice to pay federal taxes on it in the year you collect or spread it out over the life of the bond.

Risks and considerations

Treasurys are the closest thing to a risk-free investment since they're backed by the full faith and credit of the federal government. But you still owe federal taxes on the interest income.

Much of the risk associated with Treasurys is in how long they take to mature. Interest rates are fixed for the life of the bond, which can be as high as 20 or 30 years for bonds or up to 10 years for bills. If interest rates rise on newly issued Treasurys, the value of existing bonds drops. This is referred to as interest rate risk.

If rates go up and you decide to sell a bond before its maturity date, you may experience a significant loss because there's less demand for lower-yield bonds. If you hold on to the bond, you may be losing out on a higher-return investment.

Tax-exempt interest from other investments

Other types of investments may produce a kind of tax-exempt interest or return. For example, investment gains in a 529 college savings plan are not taxable at the federal or state levels if the funds are used for education.

Similarly, some might consider Roth IRAs a tax-exempt investment, since the accounts are funded with posttax dollars, which grow tax-free and can be withdrawn penalty- and tax-free under certain circumstances, such as reaching age 59 and a half.

Taxable interest vs. tax-exempt interest

Many corporate bonds have higher advertised interest rates than tax-exempt bonds, but the interest is fully taxable. It can seem like a no-brainer, then, to opt for a bond that gives you a tax break over one that doesn't.

But, Moore says, "It's not just a federal tax-free amount" with municipal bonds. "You have to look at the states and you have to look at somebody's complete tax picture to see if it makes sense."

When comparing bonds, investors need to find the tax-equivalent yield of their bond options to see which produces a higher after-tax return, says Doerr. A specialized calculator, like this one from Fidelity, can help crunch the numbers.

And although the IRS (and many state governments) exempt certain interest income from the computation of income tax, those amounts may later be added back in other situations.

For federal income tax calculation purposes, tax-exempt interest is added back to figure your modified adjusted gross income, which is a crucial figure that determines deductible contributions to traditional IRAs, eligibility for a Roth IRA, and qualification for education credits, healthcare credits, and the Child Tax Credit. It's also used to figure out how much of your Social Security benefits are taxable.

Estimate your taxes

FAQs about tax-exempt interest income

Is interest from my savings account tax-exempt?

No, interest from savings accounts isn't tax-exempt. You'll get a 1099-INT from your bank with the amount of interest earned during the year, which should be included in your gross income.

Are dividends from stocks tax-exempt?

Dividends from stocks and generally not tax-exempt. Qualified dividends are taxed at capital gains rates (0%, 15%, 20%), while nonqualified dividends are taxed at ordinary rates (10%, 12%, 22%, 24%, 32%, 35%, 37%).

How do I report tax-exempt interest on my tax return?

Tax-exempt interest is reported on Line 2a of your Form 1040. You'll find the amount of tax-exempt interest you earned in Box 8 of your 1099-INT. Reporting the interest is required, but doesn't make it taxable.