In most cases, it's more advantageous -- and less expensive -- for married couples to file joint income tax returns than filing separately. For all you may have heard or read about the "marriage penalty," tax law changes have minimized this former negative condition. If you have yet to own a home with a mortgage loan, standard deductions as a married tax filer are typically higher than itemized tax deductions. Also, tax rates for married-filing-jointly taxpayers are lower than for single or married-filing-separately taxpayers.
Married Filing Jointly Advantages
If you or your spouse earn vastly higher income than the other, you'll enjoy tax advantages filing jointly, as the tax rates effectively "average" your total household income. Should you both earn high -- or roughly equal -- compensation, this advantage is minimized. Co-mingling income and expenses often helps lower tax liability for married taxpayers when filing jointly. Allowable standard deductions are higher, further reducing tax cost. Allowing you and your spouse to combine all deductible expenses and using the married filing jointly tax schedule usually saves you money.
Married Filing Separately Advantages
If you or your spouse has high income from self-employment, or extraordinary expenses for medical or other reasons, you may benefit from filing separately. Although married-filing-separately tax rates are higher, the ability to recognize extra income or avoid deductible expense caps may benefit one spouse. When tax liabilities for the one are combined with the taxes due of your spouse, you may find some tax savings by filing separately. Always get some good advice from a tax professional first.
Federal Tax Law Changes Annually
An advantage from one tax year can easily become a disadvantage the following year. Assuming an advantage for choosing married filing separately one year will continue as a tax savings approach the next year is a mistake. Tax law changes, and your personal income/expense situation affects this choice. Always consult an experienced tax adviser before making a filing choice each year. Remember, the rule of thumb is that married filing jointly is usually the best choice, because of the tax rates and IRS incentives for deductions.
Filing Separately Eliminates Some Tax Incentives
The IRS offers a number of incentives for married couples to file jointly. When married taxpayers file separately, they lose some of these advantages, needlessly increasing your tax liability. For example, when filing separately, taxpayers can no longer receive credits for child and dependent care expenses, use special deductions for education loans and interest, and they lose special treatment for IRA contributions that allow a nonworking spouse to make tax-deferred additions to these accounts. Should you adopt a child, which is usually costly, you lose the ability to deduct adoption expenses if you file separately.
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