If you have gotten married in this last year, you may be facing the question of how you and your spouse should file your taxes: should you put the status as married filing jointly, or separately? Are there more benefits to one versus the other? How do you know what’s right for you and your spouse?
Though you may have gotten in the groove of filing taxes as a single person, you don’t need to feel overwhelmed or intimidated with filing under a new status now. We will go through the pros and cons of each kind of filing and help you identify which version is best for you.
Married Filing Jointly
Choosing ‘married filing jointly’ as your filing status is what most married couples opt for. Not only does filing together allow for a more streamlined filing, but it can also save you both money in the long run and qualify you for some helpful benefits.
Benefits
- Higher Standard Deduction – The standard deduction for married filing jointly is higher than those filing separately, meaning you get more money back.
- Simplified Filing – Filing jointly helps to consolidate income and deductions, which simplifies the tax process.
- Lower Tax Brackets – Couples filing jointly may fall into a lower tax bracket for their income than a single filer with a similar household income. This will result in a lower tax percentage.
- Access to Tax Credits – Filing jointly gives couples access to beneficial tax credits, like Earned Income Tax Credit, Child Tax Credit, and education credits.
Considerations
Though filing together is often how married couples decide to file their taxes, there are a few considerations to keep in mind when choosing this option.
- If you live in a community property state, like California, you may want to consider filing separately. It’s best to talk to a tax professional about this to find out if it’s right for you and your spouse.
- Both spouses must register as married filing jointly if able. Some exemptions and unique circumstances include: death of a spouse, a spouse being away from home, injury or disease, mental incapacitation, spouse in combat zone, or taxes signed by a Power of Attorney (POA).
- Other unique circumstances may change whether or not you can opt for married filing jointly for the prior year’s taxes. These include legal separation through divorce, the death of a spouse, or choosing ‘Head of Household’ status.
Married Filing Separately
Another option that couples are allowed is filing under ‘Married Filing Separately’. Though this can often lead to higher taxes, there are some unique circumstances in which it’s better to file separately.
When It Makes Sense
- Subject to Alternative Minimum Tax (AMT) – If either you or your spouse qualifies for an AMT due to high earnings or big deductions, it may be better to file separately.
- Liability Concerns – If there are concerns about a spouse’s financial choices or responsibility, such as questionable deductions, legal obligations, or significant tax debt, a couple may want to consider filing separately to protect the other spouse from being responsible.
- Medical Expenses – Some deductions, like medical expenses, are determined by adjusted gross income (AGI). If you are married filing jointly, the total reported income may disqualify you from getting the deduction. Filing separately, though, can allow for you to qualify for the deduction or increase the deduction amount
- Student Loan Payments – Some federal student loans are based on AGI, so filing separately could help reduce loan payments.
Downsides
Before opting for filing separately when married, there are a few downsides to choosing this status that you should consider.
- More Paperwork – Because there are two of you, naturally there will be more paperwork and the filing will be a longer process.
- Generally Fewer Benefits – There are some benefits, credits, and deductions that are unique to those filing jointly.
- Potentially Higher Taxes – If you are filing separately, it may result in higher taxes than what you would get if you decide to file jointly.
How To Decide?
Tax season can feel complicated and stressful for many couples, but it doesn’t have to be. If you have gotten married in the past year, let Golub, Sennitt, Rosenberg & Co (GSR) provide the guidance you need. We have worked with countless individuals, families, couples, and businesses to help guide them through taxes and their finances.
Whatever your unique circumstances are, trust that you will receive personalized, trustworthy, and professional help. Don’t wait until it’s too late! Contact us today to let us know how we can help your tax process run as smoothly as possible.
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