Still Married, Filing Head of Household: The "Considered Unmarried" Rule

When you separate, the default tax choices are grim: file jointly and take on your spouse's tax risk, or file separately and pay more tax. There is a third option that many separated parents qualify for and never use. If you meet the "considered unmarried" test, you can file as head of household even though you are still legally married. That can mean a better tax result without a joint return.

The statute

Internal Revenue Code section 7703(b) says that, for provisions that refer to it, a married individual who files a separate return is not considered married if:

1. The individual maintains as his or her home a household that, for more than one-half of the taxable year, is the principal place of abode of a child with respect to whom the individual is entitled to a dependency deduction, or would be entitled but for the special rules for children of divorced or separated parents in section 152(e);
2. The individual furnishes over one-half of the cost of maintaining that household during the taxable year; and
3. During the last 6 months of the taxable year, the individual's spouse is not a member of the household.

The IRS's version of the test

IRS Publication 504 restates the considered unmarried test in five parts. You are considered unmarried on the last day of the tax year if:

1. You file a separate return. Publication 504 says a separate return includes one claiming married filing separately, single, or head of household status.
2. You paid more than half the cost of keeping up your home for the year.
3. Your spouse did not live in your home during the last 6 months of the year. Your spouse is considered to live in your home even if temporarily absent due to special circumstances.
4. Your home was the main home of your child, stepchild, or foster child for more than half the year.
5. You must be able to claim the child as a dependent. But you meet this test if the only reason you cannot is that the noncustodial parent can claim the child.

The six-month rule is the one that trips people

Look at test three. Your spouse cannot have lived in your home at any point in the last six months of the year. For a calendar-year filer, that means your spouse must have moved out by the start of July. If your spouse moved out in September, you do not qualify for that year, no matter how clearly the marriage is over.

Publication 504 adds that a spouse who is temporarily absent due to special circumstances is still considered to live in the home. A spouse who is away on a work assignment and expected to return is not "gone" for this purpose.

Keeping up a home

Publication 504 explains what counts toward the cost of keeping up a home: rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. It does not include clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household.

You must have paid more than half. If your spouse is still paying the mortgage on the house you live in, add up the numbers before you assume you qualify.

The child

The child must have lived with you for more than half the year. Publication 504 says that you and your qualifying person are considered to live together even if one or both of you are temporarily absent due to special circumstances such as illness, education, business, vacation, military service, or detention in a juvenile facility, if it is reasonable to assume the absent person will return.

The dependency piece matters too. Section 7703(b)(1) refers to a child you are entitled to claim, or would be entitled to claim but for section 152(e), the rules that let a custodial parent release the claim to the noncustodial parent. Publication 504 explains the practical effect: if you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household status even though you cannot claim the child as a dependent. A noncustodial parent cannot use a child who is a qualifying child only because of those special rules.

Then the head of household requirements

Being considered unmarried gets you past the marital status hurdle. You still have to meet the head of household requirements. Publication 504 lists them:

• You are unmarried or considered unmarried on the last day of the year.
• You paid more than half the cost of keeping up a home for the year.
• A qualifying person lived with you in the home for more than half the year, except for temporary absences, such as school. A dependent parent does not have to live with you.

For a separated parent, the considered unmarried test and the head of household test overlap almost entirely.

Why it is worth the effort

Publication 504 lists the advantages of head of household status:

• You can claim the standard deduction even if your spouse files a separate return and itemizes.
• Your standard deduction is higher than for single or married filing separately.
• Your tax rate will usually be lower than for single or married filing separately.
• You may be able to claim certain credits, such as the dependent care credit, that you cannot claim if you file married filing separately.
• Income limits that reduce the child tax credit and the retirement savings contributions credit are higher than for married filing separately.

And you get all of that without signing a joint return. Your liability is limited to your own return, which matters a great deal if your spouse's finances are a mystery or a mess. Under section 6013(d)(3), only a joint return creates joint and several liability.

Your spouse's filing status

If you qualify as considered unmarried and file as head of household, your spouse does not automatically get the same status. Your spouse has to meet the tests independently, and usually will not, because the child lived with you. Your spouse's choices are generally married filing separately, or head of household if your spouse separately qualifies, for example with a different child.

That means your spouse loses the joint return option for that year unless you agree to file jointly. Expect that to come up in the divorce negotiation.

Community property states

Publication 504 notes that if you were considered married for part of the year and lived in a community property state, special rules may apply in determining your income and expenses. Filing head of household does not change how state community property law characterizes income. See the guide to community property and spousal relief.

If you filed the wrong status

If you filed married filing separately and later realize you may have qualified for head of household, review it with your return preparer before the refund period runs. If you filed head of household and later want to file jointly with your spouse, section 6013(b) generally allows switching from separate returns, which Publication 504 says include head of household returns, to a joint return within three years of the original due date. See the guide to switching filing status.

A walk-through example

Suppose a couple separates in March. The husband moves out. The wife stays in the rented home with their two children, pays the rent, utilities and groceries from her own wages, and the children live with her the rest of the year. The divorce is not final by December 31.

She files a separate return. She paid more than half the cost of keeping up the home. Her husband was not a member of the household during the last six months of the year. The children lived with her for more than half the year. She meets the considered unmarried test and can file as head of household.

Now change one fact: he moved out in August instead of March. He was a member of the household during the last six months, so she is not considered unmarried for that year. Her choices go back to married filing jointly or married filing separately.