Like many young couples, you may not have thought about how you want to file taxes. What you plan to do may depend on what a parent suggests. Some couples leave the decision up to the firm that will handle the tax returns. Individuals who meet the IRS qualifications to file jointly may be able to cut down the amount of tax they owe by filing their returns as a couple, but this isn't always the case.
If you and your spouse do not itemize your deductions, then it may be better for you to file joint returns, according to IRS Publication 501. The standard deduction is a way for you to lower your taxable income, and it is a better option for a person who does not have enough itemized deductions to exceed the standard deduction. The IRS calculates the standard deduction based on your filing status, and couples filing jointly qualify for a higher standard deduction than married individuals filing separately.
Credits work in a similar way to deductions, but they serve a different purpose. The credit reduces the amount of tax you owe, while a deduction reduces your income level. If you are married filing separately, you may not qualify for a credit. You also can't split a credit. Filing jointly allows you to take advantage of the credits, such as the childcare tax credit, the first time homebuyer's credit and the American opportunity credit.
The amount you and your spouse earn determines whether filing jointly is the best option for your taxes. Filing jointly works better for couples when one person makes more money than the other. Couples who make roughly the same amount of money may have to deal with the marriage penalty. This penalty isn't an actual fine that occurs, but it can result in a couple paying more tax than they would if they filed separately. You can always calculate your taxes for both categories, separately and jointly, to determine which is better.
If you live in a common property state, it may be better for you to file jointly. Common law states include Louisiana, New Mexico, California, Wisconsin, Arizona, Nevada, Texas, Washington and Idaho. If you live in a common property state, the state will view your property jointly. In some cases, this can include your income. Because of this, it is easier, and often beneficial, to file jointly.
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