Taxpayer

What is 'Taxpayer'

A taxpayer is an individual or business entity that is obligated to pay taxes to a federal, state, or municipal government body. The term taxpayer often refers to the workforce of a country who pays for government projects through taxation. Nearly all government-funded projects are funded by the revenue generated from taxation.

BREAKING DOWN 'Taxpayer'

A taxpayer generally describes one who pays taxes. Nearly everyone in the United States is subject to some form of taxation and, therefore, everyone (including children) is considered a taxpayer at some point. Taxes exist in many forms, including income taxes required by federal and state governments, sales taxes imposed by state governments, and property taxes levied on owners of real property (such as homes and vehicles) by local governments.

The Internal Revenue Service (IRS) or Social Security Administration (SSA) issue Taxpayer Identification Numbers (TIN) to taxpayers. The TIN is used by the IRS to administer the tax laws. Examples of TINs include the Social Security Number (SSN), Employer Identification Number (EIN), and Individual Taxpayer Identification Number (ITIN).

For federal income tax purposes, an individual taxpayer falls into one of five categories: single, head of household, married filing jointly, married filing separately, and qualifying widow(er) with dependent children.

Single Taxpayer

A taxpayer is considered single if s/he is unmarried, divorced, a registered domestic partner, or legally separated according to state law as of the last day of the tax year. The head of a household or a person who is widowed does not fall under the “single” category for tax purposes.

Single filers have lower income limits for most exemptions. The following table has the 2018 tax bracket and income range for single taxpayers.

Federal Income Tax Rate

Income Range for Single Taxpayer

10%

$0 - $9,525

12%

$9,526 - $38,700

22%

$38,701 - $82,500

24%

$82,501 - $157,500

32%

$157,501 - $200,000

35%

$200,001 - $500,000

37%

over $500,000

Standard Deduction

$12,000

 

Taxpayer as the Head of Household

A head of household is a single or unmarried taxpayer who pays at least 50% of the costs of supporting his or her household and lives with other qualifying family members for whom s/he provides support for more than half of the year. This means that the taxpayer must have paid more than half of the total household bills, including rent or mortgage, utility bills, insurance, property taxes, groceries, repairs and other common household expenses. Some examples of qualifying family members include a dependent child, grandchild, brother, sister, grandparent or anyone else you can claim as an exemption.

Head of households benefit from a lower tax rate.

Federal Income Tax Rate

Income Range for Taxpayer filing as the Head of Household

10%

$0 - $13,600

12%

$13,601 - $51,800

22%

$51,801 - $82,500

24%

$82,501 - $157,500

32%

$157,501 - $200,000

35%

$200,001 - $500,000

37%

over $500,000

Standard Deduction

$18,000

 

Married Taxpayer Filing Jointly

Two taxpayers that wed by the end of the tax year can file their tax returns jointly. When filing under married filing jointly status, couples can record their respective incomes, exemptions, and deductions on the same tax return.

A joint tax return will often provide a bigger tax refund or a lower tax liability.

Federal Income Tax Rate

Income Range for Taxpayer who is Married Filing Jointly

10%

$0 - $19,050

12%

$19,051 - $77,400

22%

$77,401 - $165,000

24%

$165,001 - $315,000

32%

$315,001 - $400,000

35%

$400,001 - $600,000

37%

over $600,000

Standard Deduction

$24,000

Married filing jointly is best if only one spouse has a significant income. If both spouses work and the income and itemized deductions are large and very unequal, it may be more advantageous to file separately.

Widow(er) with Dependent Children

This category of taxpayers is also referred to as Surviving Spouse. The federal qualifying widow or widower tax filing status is available for two-years for widows and widowers with dependents after their spouse's death. While the surviving spouse cannot continue to claim an exemption for the deceased spouse, they may claim the standard deduction for a married couple filing jointly.

The tax bracket and income range for widow(ers) is the same as that for married filing jointly.

Married Taxpayer Filing Separately

Married filing separately is a tax status used by married taxpayers who choose to record their respective incomes, exemptions, and deductions on separate tax returns. Married filing separately may be appealing to couples who find that combining their income pushes them into a higher tax bracket than either of them would be in if they filed separately. There is a potential tax advantage to filing separately when one spouse has significant medical expenses or miscellaneous itemized deductions.

The standard deduction and tax bracket for married taxpayers filing separately, as of 2018, is the same as that for a single taxpayer, except for the 35% and 37% brackets which have taxable income ranges of $200,001 to $300,000, and any amount greater than $300,000, respectively.