Column One:
Eye on Unmarried America

January 23, 2006  



Many unmarried taxpayers denied 'head of household' status

by Thomas F. Coleman

For years, I have received e-mails from single taxpayers complaining that they were not allowed to file as "head of household" for income tax purposes, even though they were the heads of their own households.  These complaints came from solo singles, most if whom were elderly divorcees and widows who were struggling to maintain a household for one.

The complaints would usually argue "I'm living on a fixed income and must maintain my own household and pay all of the bills myself.  I am the head of my own household and could use the tax break associated with the 'head of household status' but Uncle Sam won't let me.  That's not fair."

I had to explain to these single taxpayers that in order to claim head-of-household status, Congress had decided that an unmarried taxpayer had to be supporting a dependent child or relative who lived in their household.

Now, however, that type of a response would no longer be accurate.  The definition of head-of-household has been narrowed considerably more due to changes in the tax codes made in 2004.  As a result, many single taxpayers who have dependents living with them are no longer permitted to file as head-of-household and get the corresponding tax break associated with that preferred filing status.

For example, many single parents have been pushed from the head-of-household category to the less-preferred "single" filing status, resulting in a significant increase in income taxes.

In the past, parents with an adult child at home could claim head-of-household status even if the child had a lot of income and even if the parent could not claim a dependency exemption for him.

Under the new rules, the parent must be able to claim a dependency exemption for the child - a "qualifying child" in tax lingo - to qualify for head-of-household status. And for 2005, a child cannot be a qualifying child if he or she turned 19 by the end of the year (or 24 for a full-time student).

An older child might still be a "qualifying relative," enabling the parent to claim head-of-household status if certain other tests are met, but not if the child's income is over $3,200 a year. The vast majority of adults, even if they are only working part time at a low-income job, make more than $3,200 per year.

So the parent of an older child who has a reasonable amount of income may well pay more tax when tax returns are filed this year.

Many unmarried couples with children also will be pushed out of the head-of-household status and have to pay higher taxes as "single" filers.

Take the situation of an unmarried man living with his unemployed girlfriend and her young child.  The family of three lives solely on his earned income.

In 2004, the man could claim his girlfriend and her child both as his dependents and file his return as a head of household, resulting in lower taxes. But for 2005, he may not use the child to claim head-of-household status because he and the child are not blood related.

Formerly, the primary test was the support test.  The the man was eligible to file as head-of-household because he supported a child living in his household.

Now the primary test is the relationship test, and he would fail that because he and the child are not related.   And since the mother is not employed, and therefore does not file income tax returns, no one can claim this child as a dependent -- not even the person who provides 100 percent of the child's financial support.

Because of other changes in the law, the unmarried male breadwinner can't sneak in the back door to claim head-of-household status on the theory that his girlfriend's child is, in effect, his "foster child."  Now, for a taxpayer to claim head-of-household status because he supports a "foster child," the child must be placed in the taxpayer's home by some authorizing agency, such as a court or government office.

These limitations to head-of-household filing did not pop out of nowhere.  They were foreshadowed by other changes in the tax codes which occurred in 2001.

That is when Congress changed the definition of "foster child" for purposes of various tax credits.  As a result, many unmarried parents are no longer able to claim the child credit and the earned-income credit.  Those deprived of these credits can lose thousands of dollars in benefits.

Prior to 2001, the tax code had two requirements to determine whether a taxpayer qualified as a foster parent for purposes of tax credits: (1) The child had to live with the taxpayer the entire year; and (2) the taxpayer had to provide more than half the financial support for the child.

Now, the child either must be a qualifying relative or be placed in the home by a government agency.  The fact that the biological parent has court ordered custody of the child doesn't count because such custody orders do not pertain to the parent's new unmarried partner.

It is interesting how much has changed over the past several years in terms of tax policy.

During the administration of President Bill Clinton, an unmarried taxpayer who provided support for a dependent child could file as head of household and claim appropriate tax credits as a reward.  Usher in President George W. Bush and a Republican-controlled Congress, and the perks are yanked, except for those related by blood, marriage, or adoption.

One wonders just how much the so-called "culture wars" have influenced Congress to manipulate tax laws to the disadvantage of nontraditional families, while leaving all of the preferences for married taxpayers raising their own biological children. 

Unmarried America 2006

Thomas F. Coleman, Executive Director of Unmarried America, is an attorney with 33 years of experience in singles' rights, family diversity, domestic partner benefits, and marital status discrimination.  Each week he adds a new commentary to Column One: Eye on Unmarried America. E-mail: Unmarried America is a nonprofit information service for unmarried employees, consumers, taxpayers, and voters.