Which is better for married couples–a joint or separate tax filing? It depends.
If you ‘re married, you have two options on how to file your income taxes : You can file a joint return, or you and your spouse can each file an individual return. Which is better ? Read on .
Married Filing Jointly
A joint return is a unmarried return for a conserve and wife that combines their incomes, exemptions, credits, and deductions. The huge majority of married couples file jointly—over 95 % .
You can choose marital filing jointly as your file condition if you are married and both you and your spouse match to file a joint return. You can file a joint return even if one of you had no income or deductions.
only a marry copulate can file a joint return key. You are considered married for tax purposes for the entire year if, by December 31 :
- you are married and living together
- you are living together in a common law marriage recognized in the state where you live or in the state where the common law marriage began
- you are married and living apart, but not legally separated under a decree of divorce or separate maintenance, or
- you are separated under an interlocutory (not final) decree of divorce. (For purposes of filing a joint return, you are not considered divorced.)
If your spouse dies and you do not remarry in the same class, you may file a joint return for that year. This is the last year for which you may file a joint return with that spouse .
Married Filing Separately
If you ‘re married, you constantly have the option to file your taxes individually. If one of you wo n’t agree to file a joint return, you ‘ll have to file individually, unless you qualify for drumhead of family status. When you file a separate return, you report only your own income, exemptions, credits, and deductions on your individual return .
If you live in a community property state, the income you and your spouse gain is split evenly between you, as are your expenses ( unless they are paid by one spouse with his or her separate non-community funds—for model, money you earned or inherited before marriage ). There are nine community property states : Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
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There are respective disadvantages to filing individually that you need to be aware of, however, because these can easily outweigh any potential benefits :
- You cannot take various tax credits, such as the Hope or Lifetime Learning education credits, earned income tax credit, and, in most cases, the credit for child and dependent care expenses.
- The amount you can exclude from income under an employer’s dependent care assistance program is limited to $2,500 (instead of $5,000 if you file a joint return).
- You cannot take the deduction for student loan interest, or the tuition and fees deduction.
- You cannot exclude from your income any interest income from qualified U.S. savings bonds that you used for higher education expenses.
- If you live with your spouse at any time during the tax year, you’ll have to include in income more (up to 85%) of any Social Security benefits you receive.
- If you live with your spouse at any time during the tax year, you cannot roll over amounts from a traditional IRA into a Roth IRA.
- The following credits and deductions are reduced at income levels that are half of those for a joint return: child tax credit, retirement savings contributions credit and itemized deductions.
- Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
- You may not be able to deduct all or part of your contributions to a traditional IRA if you or your spouse was covered by an employee retirement plan at work during the year.
- If you own and actively manage rental real estate, it will be more difficult for you to deduct any losses you incur.
- If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
Which Filing Status Will Save You Income Taxes?
As a result of the Tax Cuts and Jobs Act, the tax rates in impression during 2018 through 2025 for marry taxpayers filing separate returns are precisely half those for marrieds who file articulation returns. Nevertheless, most marry people save on taxes by filing jointly, peculiarly where one spouse earns most or all of the income. This is because filing jointly shifts the high earner ‘s income into a lower tax bracket. If spouses earn about the same income, there should be little or no difference in their tax rates whether they file jointly or individually. The alone room to know for certain if you ‘ll pay more or less taxes by filing individually or jointly is to figure your taxes both ways. This is n’t hard to do if you use tax cooking software .
Beware Tax Cheater Spouses!
There is one likely huge drawback to filing jointly : As a general rule, when a marry match files a joint return each spouse is jointly and individually liable for the entire tax owed on the return. This means that either spouse can be required to pay the tax due, plus any matter to, penalties, and fines.
A spouse can claim “ barren spouse easing ” and avoid personally paying the other spouse ‘s taxes if he or she can show the IRS that : ( 1 ) the understatement of tax was due to the other spouse, and ( 2 ) the spouse did not know, or have argue to know, that there was an understatement of tax when he or she signed the joint fall. however, both propositions can be hard to prove. You ‘ll avoid being personally responsible for your spouse ‘s taxes if you file a freestanding return. This is something you should seriously consider if you know your spouse cheats on his or her taxes .