Newly married couples are trying to figure out if it makes sense to file their taxes together or separately. This article, will help you understand or maybe decide if you and your spouse should file separately or jointly.
A Couples Guide In Filing Tax
Married couples can choose from the option to file jointly or separately on their federal income tax returns. The IRS urges most couples to file joint tax returns by extending several tax breaks to those who file together. Most married couples choose to file jointly, but there may be a few instances when it’s better to submit separate returns. However, either filing separately vs filing jointly there are many more considerations to take into account before you make your final decision.
Filing Tax Returns Jointly
Filing jointly in federal tax return means your earnings and your spouse’s earnings will be combined together. The joint income depends on different tax brackets than single filers. Moreover, joint filers obtain one of the largest standard deductions each year, allowing them to deduct a significant amount of income when calculating taxable income.
Couples who file together can be privileged for multiple tax credits such as the:
- Earned Income Tax Credit
- American Opportunity and Lifetime Learning Education Tax Credits
- Exclusion or credit for adoption expenses
- Child and Dependent Care Tax Credit
Joint filers mostly acquire higher income thresholds for certain taxes and deductions, this means they can often earn a bigger amount of income and still potentially qualify for certain tax breaks.
Filing Tax Returns Separately
If you had a lot of out-of-pocket medical expenses last year it’s better to file a separate return. That’s because the tax code allows you to deduct out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income. When you file jointly you have one adjusted gross income which that 7.5% rule applies to.
On the other hand, couples who file separately typically receive lesser tax benefits. Separate tax returns may result in more tax.
- In 2022, filing separately taxpayers only receive a standard deduction of $12,950 compared to the $25,900 offered to those who filed jointly.
- If you file separately from your spouse, you are often automatically disqualified from several of the tax deductions and credits mentioned earlier.
- Separate filers are usually capped to a smaller IRA deduction.
- For student loan interest, they also cannot take the deduction.
- The capital loss deduction limits to $1,500 for each filing separately compared to joint filers is worth $3,000
Deciding Which Status To Use
The best way to decide whether you file jointly or separately with your spouse is to plan your tax return both ways. Double-check your calculations and then refer to the net refund or balance due from each method. Consider also the recommended filing status that gives you the biggest tax savings or better let an expert do your taxes for you and your spouse.
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