Making the decision to live together — regardless of whether you get the official marriage license or opt for a common-law union — can bring significant changes to your life. One of the things that might change is the way you file your taxes. The IRS allows you to file jointly as a couple or separately once you get married, but you may need help determining which status to choose.
Before you consider which way to file your taxes, you may need to know what you qualify to do under IRS regulations. To file jointly, you must live together as husband and wife. If your state recognizes a common-law marriage and you fit the state's requirements, this will qualify you to file jointly, according to IRS Publication 501. You can also file jointly if you are separated from your spouse as long as the courts have not finalized a divorce.
Benefits to Filing Taxes Jointly
Most people will do anything possible to find legal ways to cut their tax bills. Filing jointly may allow you to do just that. As a couple, you can qualify for more tax deductions, according to BankRate. These deductions include childcare costs, earned-income credit and child-tax credits. While you can deduct some of these expenses filing separately, the brackets are different than filing jointly and you may lose some of the benefits. Filing separately also reduces your ability to deduct capital gains by 50 percent due to tax limitations.
Benefits to Filing Separately
Some people actually find they will pay less in taxes if they file separately. This can be the case when one individual makes less income than the other person and has significant medical bills or other qualifying deductions, according to USA Today. It can be easier to qualify for deductions based on a percentage of your single income rather than your joined income. In order to deduct medical expenses, the expenses need to reach 7.5 percent of your annual gross income. Filing separately may make it easier to qualify for other deductions, as well, including un-reimbursed business expenses, tax-preparation fees, job hunting expenses and union dues. These miscellaneous deductions have to be greater than 2 percent of your annual gross income to qualify, according to Forbes. You may want to consider filing separately if one spouse takes more financial risks or has financial obligations such as child support.
If you live in a common property state, you may find it easier to file jointly based on your state's laws. California, Arizona, Louisiana, Idaho, Nevada, Washington, Texas, New Mexico and Wisconsin are all common property states. In these states, you may not be able to file taxes separately, according to IRS Publication 555. When you can, the process can be more complex than it is in other states. Community property may refer to real estate you and your spouse own and to your income. These states may consider any income earned by one spouse as community income for both partners.
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- Can I File IRS Taxes As a Single Person When I Am Married?