Marriage is all about teamwork: two people who pledge to stick together for better or worse, richer or poorer, and in sickness and in health. And although some exceptions do apply, there’s no better practical example of this vow than a married couple jointly filing their annual income taxes.
Of course, like all things in a good marriage, your tax filing choices should be based on careful consideration. With that in mind, let’s look at all the pros and cons of joint filing before you decide what’s best for you and your spouse.
There are many advantages to jointly filing your tax returns with your spouse, the first of which is that joint filers receive a major deduction each year. They are allowed two exemptions from their income and qualify for several tax credits, including:
In addition, married couples who file separately will likely be eligible for fewer tax considerations and may be subject to a higher tax rate. These couples are also ineligible for several tax deductions or credits (such as those related to student loan interest or tuition) that could significantly lower their liability or even result in a better refund.
For instance, in 2016, married taxpayers who filed separately received a standard deduction of $6,300 while those who filed jointly received a $12,600 standard deduction. Of course, if both spouses work full-time and would take full advantage of the individual deductions, then the deductions work out the same either way. However, if your spouse doesn’t work or has limited income and wouldn’t otherwise take advantage of the full $6,300 deduction on their individual return, then getting the equivalent of two standard deductions on your joint return can be a big advantage.
RELATED: Determining Income Type (Earned and Unearned)
Although it’s rare, there might be some occasions where filing separately could result in a more favorable outcome for one or possibly both spouses. For instance, if you suspect that your spouse could be omitting or willfully manipulating the information on their taxes, you might want to file separately to avoid responsibility for any inaccuracies or tax liabilities that result from their behavior. Married filing separately (MFS) might also be the best option if you or your spouse may have a liability that you don’t truly share.
More commonly, spouses choose to file separately to take advantage of substantial itemized deductions that are limited by adjusted gross income (AGI). These deductions might include medical expenses, charitable donations, personal casualty losses, investment expenses, and other miscellaneous expenses.
For instance, the IRS limits deductions on out-of-pocket medical expenses to those that exceed 10% of a household’s adjusted gross income (7.5% for individuals aged 65 and older). So, if you and your spouse have a sizable combined income, it could be difficult to deduct major medical expenses from your income taxes. By filing separately, you could potentially claim more deductions (since they’ll be compared against 10% of only one of your incomes instead of 10% of your combined income).
In our experience, we’ve found that sound financial planning can go a long way toward marital bliss. If you are married or considering getting married, you and your spouse should discuss the financial implications of those sweet and sincere vows, especially as they relate to your tax filing status.
For additional help with tax preparation or resolving a tax liability, please contact S.H. Block Tax Services directly by completing this simple form or calling (410) 872-8376. We have helped thousands of couples get the most out of their tax returns, and we would love the chance to do the same for you!
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.
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