Filing taxes can be a real headache, but married couples have it harder when they have to decide if they want to file their taxes jointly or separately.
Most married couples will just file jointly to save the hassle, but there are some situations where filing your taxes separately might be better.
The IRS usually recommends married couples to file jointly, and if they do married couples are usually given extensions on many tax breaks.
So what are these situations where it’s better to file separately? Keep reading and we’ll be sure to let you know what the best thing to do for your taxes is.
Contents
Advantages Of Filing Your Taxes Jointly
You’ll Earn More Credits And Deductions
Married couples get an incentive to file their taxes jointly, and this is being eligible for certain tax breaks.
Filing jointly means you can claim the Earned Income Tax Credit, Child and Dependent Care Credit, Lifetime Learning Credit and the American Earning Opportunity.
You may be eligible for the dependent care credit if you’re filing separately as long as you’re legally separated or living apart from your spouse.
You’re also able to claim a few deductions too, if you file jointly then you’re eligible for student loan interest dedication, the maximum state and local tax deduction and the full IRA deduction.
If you’re a married couple filing separately, you’ll lose your chance to claim any of these credits or deductions.
You May Get A Lower Tax Rate
Since you’ll be combining both of your incomes, you may end up paying a lower tax rate.
This could potentially bring a high earner down into a lower tax bracket, every couple is different and this may not apply to you, but this could be useful if you or your spouse earns a substantial income.
You Can Contribute To A Roth IRA
Of course you’ll want more money to retire with, so this one seems like a no brainer.
If you’re a married couple and you’re filing jointly, you’ll have higher income cutoffs to be able to pay into a Roth IRA account.
You can contribute to a Roth IRA account as long as the adjusted gross income on your joint return is less than $214,000, the amount you can contribute will start to be phased out once you earn more than $204,000.
Couples filing separately will only be able to contribute to a Roth IRA account if their income is under $10,000.
Disadvantages To Filing Your Taxes Jointly
You’ll Have To Pay Any Tax That Is Owed
Now being married you should probably know your spouse well enough to know that they won’t cheat on their taxes, but that’s not always the case.
When a married couple files a joint tax return, each spouse is jointly and individually responsible for any tax that is owed on the return, and this might be the entire tax, interest, penalties or fines!
Thankfully if this happens you can claim “innocent spouse relief” to avoid paying the tax that is owed on the return.
But only if you can prove to the IRS that the understatement of the tax was due to the other spouse and you didn’t know that there was an understatement of tax when you filed the joint tax return.
These can both be incredibly hard to prove, so you may have a tough time proving it to the IRS, filing separately can ensure that you’re not liable for anything your spouse owes on their tax return.
You May Not Be Able To Take Advantage Of Deductions For Medical Costs
If your spouse is in and out of the emergency room like nobody’s business, then you may want to think twice before filing your taxes together.
Usually, if you have unreimbursed allowable medical and dental expenses that are under 10% of your adjusted gross income, then you can claim it back.
But having a combined income when filing jointly would make this much more difficult.
Advantages Of Filing Your Taxes Separately
Reduces Your Income For Student Loan Repayments
If you or your spouse has an income-driven student loan repayment plan for federal student loans, then you may want to consider filing your taxes separately.
If you file jointly, then you’ll have a higher combined income which could significantly drive up the monthly payments and leave you out of pocket more so than if the monthly repayments were decided based on your income.
You May Pay Less
I know we said that you may pay less if you combine both of your incomes, but if you and your spouse earn a similar amount then it may be worth filing separately.
If both spouses earn a high amount of income that is more or less the same, they may end up with lower tax rates.
Disadvantages Of Filing Your Taxes Separately
You May End Up Paying A Higher Tax Bracket
If you both earn similar incomes, but are more toward a lower amount of income than higher, you may be put into a higher tax bracket and pay more tax than you would have on a jointly filed return in a lower tax bracket.
You Won’t Get Any Deductions
Filing your taxes separately means that you won’t be eligible for any credits or deductions.
Such as the standard deduction of $25,100, reducing taxable income by the highest amount or the maximum capital loss deduction of $3,000.
Final Thoughts
It depends on your circumstances which would be better for you, you may earn a higher income and combining your incomes together will give you a lower tax bracket.
But you may both earn a similar amount of income that is on the lower scale, and in that case it would be much better for you to file your tax returns separately.
Each married couple will be completely different, it’s up to you to do the research and see which is better for you both.
