Head of Household Qualifications

I am a single working mom and have three children who are under 16 and in school who I properly claim as dependents. I live with my Mother and Father in their home. A tax preparer has told me I should file as head of houshold without questioning the amount I pay toward the househole costs. Is there any way I can do that. The house is a large old home, and there is no way I could be paying 50% of the househole costs considering my income. I support my children without child support payments, making payments to my parents to cover my familyies share of food and utilities. but fall short in covering costs such as property tax, mortgage interest. These costs would be covered by my parents if I lived with them or not. What should I do about filing status regareding HOH?

This subject seems to pop up here every two or three years.

The issue of two families occupying the same physical building and maintaining separate households for purposes of filing as HoH was addressed in Estate of Fleming v. Commissioner, 33 T.C.M. 619 (1974), acq., 1974 AOD LEXIS 65. This was followed by the IRS publishing Chief Counsel Memorandum SCA 1988-041 that explains their position.

There have been subsequent tax court decisions on this issue. Both the court case and the IRS guidance make it clear that 1. it is possible to have more than one household at the same physical address and that 2. whether there is two separate households is a matter of all the facts and circumstances and 3. the burden of proof is on the taxpayer(s) to show that there are two separate households for purposes of filing as HoH and 4. having shared space (e.g., a kitchen) does not in itself say that there is only one household.

So... while in almost every case the physical boundaries do define the household, there are times when the physical boundaries can contain more than one household. When the situation arises, the two families will have to show that they actually live their lives in two separate households and they must maintain records that accurately reflect what each family is paying for maintaining their separate household.

Given the nature of parents and children living together, it would be extremely rare that a single parent living with a child(ren) in her parent's home would be able to show that they lived their lives in a separate household from her parents.

Please note that the IRS acquiesced to the tax court's favorable decision for the taxpayer.

position.http://www.irs.gov/pub/irs-wd/1998-041.pdfThere have been subsequent> tax court decisions on this issue.>

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Thank you for the very detailed and thoughtful reply. As far as the child support question, to make a long story short, the courts decided to trade off the support payments in exchange for the father paying all transportation costs for my children making prescribed visitations. This was done to facilitate my taking the children out of state to return to my original place of residence which prevented their father from having typical contact . Regarding the HOH question, you have confirmed my concerns about filing that status. Thank you again.

True, but kids living with their grandparents seems like one household. If it were some unrelated person, like me, living in that household then HoH might work, but now I'm skeptical.

And of course, the other question is whether FMV rent is being paid, as you indicated further in your post. From the sentence "there is no way I could be paying 50% of the household costs considering my income" I'm guessing the answer might be no.

Worst case, maybe the grandparents can claim the grandkids.