Love and taxes
Whether to file jointly or separately on your federal taxes
Together forever, except maybe tax time?
Married couples have the choice of filing jointly or separately on their federal tax returns. Filing jointly is typically the best option, but there are some instances in which separate filings make sense.
Here are a few things to know before you decide:
1 Marital status In the eyes of the IRS, it doesn’t matter what day you got married, only which year. Taxpayers who were legally married as of Dec. 31 are able to file as marrieds for the full year’s tax benefit.
The marriage of a same-sex couple is treated the same as that of any other marriage, according to the IRS. However, people in registered domestic partnerships, civil unions or other relationships that are not considered a marriage under state law are not considered married for federal tax purposes.
2 Try together Filing together will generally give you a bigger refund or smaller tax burden, says Lisa Greene-Lewis, a CPA and tax expert at TurboTax.
The IRS gives joint filers larger deductions. Couples who file together also qualify for multiple tax credits, such as the earned income tax credit or certain education benefits, which they couldn’t claim on their own.
Joint filers also face higher income thresholds for certain taxes and deductions. This means they can earn larger amounts of income and still qualify for certain tax breaks, according to TurboTax.
3 Apart While filing separately may force you to pay a higher tax rate, it may also save you from some certain woes.
One major reason to file separately is because one spouse has tax problems, such as outstanding tax debt or an unwillingness to pay taxes period. When you file separately, your refund cannot be seized to pay off a spouse’s debts.
If a spouse has large medical expenses to claim, some couples may file separately because these expenses can be deducted only if they exceed 10 percent of adjusted gross income. By eliminating one person’s income from the equation, that threshold is more easily met.
4 Test run The best way to find out is to prepare your tax return both ways to see the end result. Tax preparation software like TurboTax will calculate this for you. Or you can use TaxCaster, the company’s free tax calculator to estimate the amount owed. Or check out the Tax Policy Center’s marriage bonus and penalty tax calculator at http://tinyurl.com/bcol85a