A married couple Options to make on time tax: they can File their income tax returns Jointly or severally. Most married people file joint returns automatically, but there are some circumstances where filing separately may be preferable. “Separately married filing is an unusual filing situation, although it may be beneficial for some legal and strategic reasons,” says James AJ Revels, CPA and KPMG’s partner in Philadelphia. Here are some reasons to file jointly or separately:
Reason to file jointly
1. You may get a lower tax rate.
In most cases, a married couple will come forward by filing jointly. “You get lower tax rates when you get married jointly, and you have to file jointly to claim some tax benefits,” says Lisa Green-Lewis, CPA and tax specialist for Turbotax. “You need to think Tax rate, What else your income Deduction And when you are thinking about filing jointly or separately, you will be eligible for it.
2. You earn more credits and deductions.
If you are married, you are only eligible for certain tax breaks on filing a joint return. Couples who file separately to claim the Earned Income Credit, American Opportunity Credit and Lifetime Learning Credit for education expenses lose opportunities. Married people filing separately also cannot deduct student loan interest or deduct tuition and fees.
In most cases, if you file separately, you cannot claim a dependent-care credit, but if you are legally separated or living separately from your spouse, you can still file separately and credit May be able to claim, says Revels. Also, your child tax credit They say that the capital loss deduction limit would be half that amount on a combined return.
3. You can deduct retirement account contributions.
Married couples who file jointly have income cutoffs too high to be eligible to contribute to the Roth IRA. they can do Contribute to a Roth IRA As long as the revised adjusted gross income on their combined returns is less than $ 208,000 in 2021, if they make more than $ 198,000, the contribution amount will start in a phased manner. But if you are married separately and live with your spouse at any time during the year, you can only contribute to a Roth IRA if your income is less than $ 10,000.
Reason for filing separately
1. You earn the same income as your spouse.
There are some situations in which married couples may enter separately. The way tax brackets are calculated, some high-income couples may end up with lower tax rates if they file separately, Green-Lewis says. “High-income earners, if both spouses earn the same, can do better filing separately,” she says.
But low-income couples can pay more tax if they file separately. “Possibly you will have a slightly higher tax when you file separately, which would be on a joint filing in lower tax brackets,” says Revels.
You can run with your number Turbotax Taxcaster If you file separately versus jointly, to estimate how much you will pay in taxes. Most tax software will perform calculations both ways and tell you which filing position will work better for you.
2. You have huge medical bills.
Filing separately may help you qualify for certain tax breaks. For example, if you Calculation, You can deduct non-stop medical expenses that exceed 7.5% of your adjusted gross income. If a spouse has very high medical expenses and low income, filing separately may make it easier to cross the 7.5% income threshold to cut expenses. “These medical expenditures would have to exceed 7.5% of their adjusted gross income and exceed the standard deduction in order of benefit,” says Revels.
Now that the standard deduction is so high, however – $ 24,800 for married couples filing jointly, and $ 12,400 for single taxpayers and married individuals filing separately in 2020 – some itemize their deductions Huh. If one husband makes his deduction, the other husband must also itemize. “If your husband itemizes deductions, you cannot claim the standard deduction,” says Revels.
3. Your income determines your student loan.
Filing separately can help reduce the income that is used to determine Student loan payment, Says Revels. “Some taxpayers’ student loan payments are based on their tax return income,” he says. “It may be beneficial to convert to a separately married filing if this will be the result of a reduced payment plan.”
4. You do not want to be responsible for each other’s tax liabilities.
One of the most common reasons some couples file separately is to limit their obligation to the other spouse. Tax errors.
“In situations where there is a lack of trust between spouses, usually due to business activities or tax status on tax returns, filing separately to help protect the innocent spouse from any potential legal or tax issues There is a way, ”says Revels.
Morris Armstrong, a designated agent in Cheshire, Connecticut, states, “When you jointly file a marriage filing, each person is responsible for the accuracy of the return and the payment of that tax, which may occur in the future Is or is assessed. ” To represent taxpayers before the IRS. “Also, if there is a history of arrears, or you are filing for several years at a time to come into compliance, filing as a married filing jointly puts all assets on the table. This means that the wife he has $ 600,000 in. 401 (k) may be forfeited by the IRS to satisfy back taxes, even if the bulk of the income, and mistakes, are due to the other spouse. Occurred. ”
Couples usually file separately during Divorce The process, says Revels. “Separately used during married filing Process of Divorce To separate each person’s tax situation and finances, “he says. It also removes responsibility for each other’s tax liabilities.”