Are You Using the Right Tax Filing Status?

Your tax filing status determines key aspects of your return, including your standard deduction, tax rate, and eligibility for credits. If your life or residency situation changed this year, you may need to update your filing status to maximize your savings and compliance. For nonresidents or newcomers to the U.S., understanding your tax residency status is just as essential. Here’s how to make sure you’re in the correct tax category and key steps for those recently settling in the U.S.

Filing Statuses

Single filing status generally applies to taxpayers who are: Unmarried or legally separated on the last day of the year, do not qualify as Head of Household, and who are not filing a joint return with a spouse.

Examples of Typical Single Filing Situations:

Recently Divorced with No Dependents: If you are divorced with no children or other dependents, you would typically file as Single. This status provides a standard deduction of $13,850 for 2024 but has higher tax rates than Head of Household or Married Filing Jointly.

Young Adult or Non-Parent with No Dependents: If you are an individual without children or dependents, whether you’re in college, early in your career, or simply not supporting any dependents, you’ll likely file as Single.

Filing as Head of Household (HOH)

Head of Household filing status requires the following criteria: The taxpayer must be unmarried or considered unmarried (single, divorced, or legally separated), provide more than half the cost of maintaining a home, and have a qualifying dependent, such as a child, for more than half the year.

Examples of Head of Household Situations:

Single Parent or Divorced Parent with Dependent Children: If you are divorced with one or more children living with you for more than half the year, you may qualify as Head of Household. This filing status provides a higher standard deduction ($20,800 for 2024) and offers more favorable tax brackets than Single status.

Taking the Child Tax Credit: The parent who claims the child as a dependent generally qualifies for the Child Tax Credit. This credit is available only to the parent who files as Head of Household or Married Filing Jointly, not to parents filing as Single without dependents. The credit can be worth up to $2,000 per child, and if you’re eligible for Head of Household status, you may also qualify for additional credits, such as the Earned Income Tax Credit (EITC).

In cases of divorce or separation, parents sometimes alternate years for claiming children as dependents to take turns receiving the Child Tax Credit. If you and your ex-spouse have such an agreement, ensure it’s clearly documented, as the IRS requires the custodial parent (the parent with whom the child lived for more than half the year) to provide a signed Form 8332 to allow the non-custodial parent to claim the credit.

Married Filing Jointly (MFJ)

Married couples generally benefit most from filing jointly, as this filing status combines income, maximizes certain credits, and allows the highest standard deduction, which is $27,700 for 2024. However, you must be legally married on December 31 to file jointly for the year.

Examples of Married Filing Jointly Situations:

Recently Married Couples: Couples who got married during the tax year can file jointly, which often offers a lower tax bracket than if each spouse filed separately.

Eligibility for the Child Tax Credit: Married couples filing jointly with dependents may claim the Child Tax Credit, which helps reduce tax liability by up to $2,000 per qualifying child. Additionally, MFJ filers are eligible for the Earned Income Tax Credit (EITC) and other credits with higher income limits than other filing statuses.

Special Considerations for Nonresident Taxpayers Moving to the U.S.

An Individual Taxpayer Identification Number (ITIN) is essential for nonresidents who are not eligible for a Social Security Number but have a U.S. tax filing requirement. Here’s what you need to know:

When is an ITIN Needed? Nonresidents generally need an ITIN if they’re required to file a Form 1040NR (U.S. Nonresident Alien Income Tax Return), often because of U.S.-sourced income like interest, dividends, or rental income. To apply for an ITIN, you must complete Form W-7, which will be used when filing your nonresident return. Keep in mind that ITINs must be renewed if not used on a federal tax return for three consecutive years.

Limitations with an ITIN: Nonresidents with an ITIN can file a 1040NR, but they are ineligible for the Earned Income Tax Credit (EITC) or the Child Tax Credit if the child does not have a valid SSN. Moreover, nonresidents cannot claim credits available only to U.S. residents or citizens, such as the Education Credit or Premium Tax Credit.

Transitioning to an SSN as a Resident

Nonresidents who become U.S. residents through employment, marriage, or other qualifying reasons will generally be eligible for a Social Security Number (SSN). Once you become a resident and obtain an SSN, you will file as a U.S. resident and report worldwide income.

When Can You Apply for an SSN? As soon as you gain lawful employment authorization or residency status that qualifies you for an SSN, you can apply for one. Unlike an ITIN, which limits eligibility for certain credits, an SSN allows for more comprehensive tax benefits, including the Child Tax Credit and Earned Income Tax Credit.

Filing Status and Credits with an SSN: Once you are a resident with an SSN, you may file as Single, Married Filing Jointly, or Head of Household, depending on your circumstances. This shift from nonresident to resident can also mean eligibility for tax credits unavailable to nonresidents.

Filing the correct tax status ensures that you’re maximizing potential deductions, credits, and refunds available to you:

For U.S. citizens and residents: Choose the appropriate filing status—Single, Head of Household, or Married Filing Jointly—to benefit from the correct deductions and credits. If you are a custodial parent, review options for claiming the Child Tax Credit if filing as Head of Household or Married Filing Jointly.

For nonresidents: Apply for an ITIN if you’re required to file a 1040NR, but know that this limits your eligibility for certain credits. Once you qualify for an SSN as a U.S. resident, you can enjoy more favorable tax treatment and credits.

The rules around choosing a filing status, claiming dependents, and tax residency can be complex, especially when navigating nonresident and resident tax statuses. For guidance on choosing the right tax filing status and understanding which credits and deductions apply to you, reach out to MKHS Tax Group at info@mkhstaxgroup.com. We’re here to help you navigate your tax situation as you prepare for year-end.