Married couples have two options for filing taxes. They can either file taxes jointly or separately. There are advantages and disadvantages to both. In this article, we will go over the differences between filing jointly or separately.
Reasons to File Jointly
There are a few different reasons to file a joint tax return. Learn about three of them below.
- You May Get a Lower Tax Rate
Usually, it is of benefit to file a joint tax return. The main reason is it usually results in being in a lower tax bracket. Which lowers your tax rate and burden. - You Earn More Credits and Deductions
There are certain credits and deductions that are available to you if you are married filing jointly. Credits include the American Opportunity Credit, the Lifetime Learning Credit, and the Dependent Care Credit. However, if you are legal separated you may still be able to claim the Dependent Care Credit. Additionally, unless you live apart and meet other requirements you cannot claim the tax credit for qualified adoption expenses unless you are filing jointly. Filing jointly can also help you to avoid the Medicare high income surcharge. If you are filing separately and you make between $103,000 and $397,000 you will have to pay a monthly premium of $559. The incomes levels are higher for those filing jointly. For example, if you make between $206,000 and $258,000 your monthly premium would be $244.60. - You Can Contribute to a Roth IRA
If you file jointly, you have a higher income cut off in which you can make Roth IRA contributions. In 2023 the total income must be less than $228,000 to contribute. If you file separately and live with your spouse any time during the year, your income must be under $10,000 to contribute to a Roth IRA.
Reasons to File Separately
Filing a joint return is usually the best option for more couples. However, there are certain times filing separately is best. Learn about four of these reasons below.
- You Earn the Same Income as Your Spouse
If you and your spouse are both high earners, you may end up in a lower tax bracket if you file separately. However, if couples have lower income, they may usually pay more if they file separately. - You Have a lot of Medical Bills
If one spouse has a lot of medical expenses it may be easier to cross the 7.5% threshold for deducting medical expenses if you file separately. To make this strategy worthwhile your medical expenses must be higher than 7.5% of you Adjusted Gross Income and higher than your standard deduction. The standard deduction if you file separately is $13,850. - Your Income Determines Student Loan Payments
Some student loan payments are based off of your tax return income. If you want to try to get lower payments, you can try filing a separate return to reduce your income. - You Want to Avoid Your Spouse’s Tax Liabilities
When you file a joint tax return you become jointly responsible for the contents of the tax return or paying back taxes owed. If you do not want to be jointly responsible for your spouse’s tax liabilities, you can file separately.
Filing Taxes Jointly or Separately
Whether you should file taxes jointly or separately will depend on many factors. Meet with an Enrolled Agent who can help you determine which filing status is best for your situation.
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