Qualifying for head of household status.

Facts

Diane Davis was divorced in June of this year. Her married son Eric (a full-time student) and his wife live with her when not away at school. Eric and his wife together will make less than $1,000 this year. Diane provides more than half of the support for the household. She has made a written declaration using Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, to allow her former husband to claim the dependency exemption for Eric. Even though Diane was divorced by year-end, she is unsure of her filing status.

Issue

Can Diane claim a favorable filing status for the year of divorce?

Analysis

An unmarried taxpayer must file as single if the taxpayer does not qualify for another filing status. However, an unmarried taxpayer will qualify for more favorable rates, earned income and child care credits, and a higher standard deduction, if he or she can qualify for head of household status.

The first requirement for head of household status is that the taxpayer be unmarried or considered unmarried at year-end. In addition, the taxpayer must provide more than half the cost of maintaining a household that was the principal residence for more than half the year of the taxpayer and a qualifying dependent. Temporary absences due to illness, education, business, vacation or military service are counted as time lived in the home if it is reasonable to expect that the qualifying dependent will return.

A qualifying dependent is one who can be claimed as a dependent for purposes of the dependency exemption. However, if the taxpayer is unmarried, and the qualifying dependent is an unmarried child, grandchild, stepchild or adopted child, he does not have to be a dependent.

If the taxpayer is considered unmarried but not legally divorced or separated, a qualifying dependent who is a child, grandchild, child, step-child or adopted child must meet the dependency tests. The taxpayer still qualifies for head of household status as long as the dependent meets the dependency tests, eventhough the noncustodial parent claims the dependency exemption only because the taxpayer states in writing that the noncustodial parent can claim the exemption (Form 8332 satisfies this requirement) or the noncustodial parent provides at least $600 support for the dependent and claims the dependency exemption under a pre-1985 divorce decree.

If the qualifying dependent is a married child, this child must qualify as the taxpayer's dependent under the dependency tests, even though the taxpayer allows the noncustodial parent to claim the dependency exemption only because the taxpayer states in writing that the noncustodial parent may claim the dependency exemption, or the noncustodial parent provides at least $600 support for the dependent and claims the dependency exemption under a pre-1985 divorce decree.

Head of household filing status is not available to taxpayers who can claim the dependency exemption under a multiple support agreement. However, a taxpayer can claim head of household status if the taxpayer provides more than half the cost of maintaining a home that was the main home of the taxpayer's parent, even if the parent did not live with the taxpayer, as long as the parent satisfies the dependency test.

When determining if the taxpayer has provided more than half of the cost of maintaining a home, the amount of rent, mortgage interest, property taxes, utilities, upkeep and repairs, insurance, and food eaten at home paid by the taxpayer must be compared to the total cost of these items.

Conclusion

Diane qualifies for head of household status. Her divorce qualifies her for the first requirement that the taxpayer be unmarried or considered unmarried by the end of the year. In addition, to claim head of household status with a married child as the qualifying dependent, the taxpayer must have provided more than half the cost of maintaining a home in which the taxpayer and the qualifying dependent lived for more than half the year. The taxpayer must be able to claim the married child as a dependent under the dependency tests, but need not actually claim the dependency exemption if the married child can be claimed as a dependent by a noncustodial parent. This requirement is met because Diane provided more than half the cost of maintaining the home in which she and Eric lived. Eric meets the dependency tests even though Diane executed Form 8332, Release of Claim to Exemption for Child of Divorce or Separated Parents.