Can two people, who both live at the same address, each qualify for the head of household filing status (HOH)?
This seemingly simple question has a very complex answer. In order to answer the question, it’s important to keep in mind the criteria to be eligible for head of household status:
- The taxpayer must be unmarried,
- The taxpayer must be able to claim as a dependent a closely related person,
- That closely related person must actually reside at the same residence as the taxpayer for more than half the year, and
- The taxpayer must pay for more than half the cost of maintaining the residence.
When two (or more) taxpayers share the same address, the question sometimes arises whether the address itself constitutes one household, or whether each family living at that address constitutes its own separate household.
The Internal Revenue Service analyzes the situation based on all the facts and circumstances. The IRS’s general thinking is outlined in a memorandum from the Chief Counsel’s office (SCA 1998-041, pdf 9 pages). In their advice, the IRS outlines their thinking over whether two persons sharing the same residence can each qualify as head of household.
What does “a household” mean?
The underlying tax law, Internal Revenue Code section 2(b), and the IRS’s interpretation of that law, Treasury Regulations section 1.2-2, state that, among other things, a taxpayer must “maintain as his or her home a household….” This phrase “a household” is what generates the tax issue.
Does “a household” mean one single residential structure, or does “a household” have less a physical meaning and refer to economic units living inside the residence?
The IRS has adopted the perspective that “head of household filing status is not a matter simply determined by physical boundaries, but by all the facts of a case.” In other words, just because two families share the same physical address, that does not automatically mean they cannot both be head of household.
Instead, people will need to carefully analyze the actual circumstances of their situation.
Proving that Two Separate Households Share the Same Address
Taxpayers who share the same physical address will need to prove whether they “conduct themselves as separate households or one household” and especially “whether each family acts independently of each other in matters not related to the house.”
Some factors that would weigh in favor of there being two separate households sharing the same residence might include:
- Are there separate telephone lines for each family? Separate utility bills?
- Do the taxpayers maintain separate finances and separate bank accounts? Or do they have a joint account or commingle funds?
- Does one family contribute to the financial support to the other?
- Do the adult taxpayers have separate bedrooms?
- Do the children have separate bedrooms?
- Do the family members give Christmas and birthday presents together or separately?
As you might surmise from these questions, the IRS will attempt to figure out whether the taxpayers act as a family unit, or whether the taxpayers act as separate from each other. The more that two taxpayers act like they are in a family relationship, the less likely the IRS will allow both taxpayers to claim head of household.
Professional Advice Recommended
Due to the complexity of this situation, taxpayers who feel they qualify for head of household status even though they share the same address with another taxpayer should seek advice from an attorney, enrolled agent or certified public accountant before filing their tax returns. These professionals are trained to analyze situations and provide tax advice.