How to Compute Tax Liability for the Head of Household
- 1). Calculate your total income. This includes all W-2 wages, income from 1099's, rental and business income, as well as any other source of income. To obtain your adjusted gross income, take your total income and subtract any allowable deductions, as set forth on lines 23 through 35 on Form 1040. This includes allowable moving expenses, individual retirement account contributions and tuition fees paid, among others.
- 2). Determine if you will itemize your deductions or use the standard deduction for filing head of household. The standard deduction for the tax year 2009 for head of household is $8,350, which s $2,650 more than that of a single person or one married person filing separately. After reviewing Schedule A of form 1040, you will be able to determine if your itemized deductions will equal more than the standard deduction set forth by Internal Revenue Service. Subtract this amount from your adjusted gross income.
- 3). Multiply the standard exemption amount, as set forth on Form 1040, line 42, by the number of exemptions you are claiming. By definition, heads of household provide support for other people in their homes. Exemptions include yourself, your children and other relatives in your household whom you support. For example, for the year 2009, the exemption amount is $3,650. If you have two children and are claiming them in addition to yourself, you would multiply $3,650 by three. Then subtract this amount from your adjusted gross income minus your deductions. This is your taxable income.
- 4). Look in the Form 1040 Instruction booklet to determine what tax is owed for your taxable income. There are different columns for each filing status, such as married, single or head of household. Look in the head of household column for your income level. This amount is known as your tax.
- 5). Subtract any allowable credits from your tax. Credits include child-care expenses, education credits and the child tax credit, among others. Credits directly reduce the amount of tax you owe, dollar for dollar. As a head of household filer, you should understand the many specific credits applicable to dependent children. You will also add other taxes owed, such the self-employment tax or taxes assessed on individual retirement accounts. The end result is your total tax.
- 6). Subtract any Earned Income Credit you qualify for, estimated payments you made through the year, taxes withheld from your income through the year or other qualified payments. Whatever total is left is the amount of taxes you owe. If the amount is a negative number, you have overpaid for the year and are due a refund from the IRS.