Before you decide how to file your federal income tax return, you should consider all your options. As a married couple, you can file a joint return, which allows you and your spouse to combine your incomes, exemptions and deductions. Most of the time, this will give you a lower combined tax obligation, but you will also both be liable for the entire tax bill.
The Average Tax Return for Those Married Filing Jointly With Over $100,000
The U.S. federal income tax system uses a graduated tax rate. Your tax bracket refers to the tax rate on the last dollar you earned for the year, but it probably doesn't reflect the actual percentage of your income that you paid in income taxes. For example, if you filed your taxes using the married filing jointly status, and had taxable income of $100,000 after deductions, exemptions and adjustments, you would be in the 25 percent tax bracket, but you wouldn't pay $25,000 in income taxes. You would pay 10 percent on the first $17,400 ($1,740), plus 15 percent on the next $53,300 ($7,995) plus 25 percent on the next $29,300 ($7,325) for a total income tax liability of $17,060, or just over 17 percent for the 2012 tax year. Your tax rate increases to 28 percent on taxable income $142,700, to 33 percent on taxable income over $217,450 and to 35 percent if you have combined taxable income in excess of $388,350.
What Interest is Deductible When You're Married and Filing Jointly?
As of 2011, if you were married filing jointly and your modified adjusted gross income did not exceed $150,000, you could deduct up to $2,500 in student loan interest. Student loan interest deductions represent an adjustment to your income, so you can either itemize or claim the standard deduction. The $2,500 maximum is per return, not per person. Because you combine your incomes and deductions when you file a joint return, it doesn't matter which spouse pays the interest. If you itemize your deductions you can deduct qualified interest on a mortgage secured by your primary residence and second home. The mortgage interest deduction is limited to $1 million in total principal amount. Points you pay to secure a mortgage count as mortgage interest. You can also deduct investment interest you pay on money you borrow to purchase investment property. For example, you can deduct the interest on a margin account that you use to buy taxable securities.
Limitations on a Non-deductible IRA if Married and Filing Jointly
If your combined modified adjusted gross income exceeds $90,000 and one of you is covered by a qualified retirement plan at work, your ability to deduct your IRA contributions is reduced. Deductions for IRA contributions are eliminated if your combined modified AGI was $110,000 or more. Typically, you can still make non-deductible IRA contributions up the limits prescribed by law. For the 2012 tax year, the maximum each spouse can contribute to a non-deductible IRA was $5,000. The maximum contribution increases to $6,000 if you are 50 years or older. You'll need to report your nondeductible contributions on Form 8606 even if you are not required to file a federal income tax return.
Tuition Tax Breaks for Married/Filing Jointly
If you file your taxes as married filing jointly, and your modified adjusted gross income is $160,000 or less, you can claim the American Opportunity tax credit of up to $2,500 for expenses paid in 2012 for qualifying tuition, fees and materials. The Lifetime Learning Credit can offset up to $2,000 of qualified education expenses, but you can't claim both the American Opportunity Credit and the Lifetime Learning Credit. If you incur educational expenses in connection with your job, you might be able to deduct the cost as an itemized deduction. For the 2012 tax year, you can deduct up to $2,500 in interest you paid on your student loans even if you don't itemize your deductions, provided your modified adjusted gross income does not exceed $150,000.
Can I File for Taxes Using a Married Name if My W-2 Is in My Maiden Name?
The Internal Revenue Service considers your marital status on the last day of the year to be your marital status for the entire year. If you got married on December 31, you can file your taxes using the married filing jointly status, even if your employer provides you with a W-2 in your maiden name. If you have time, your best bet is to request a corrected W-2 from your employer and use it to file your taxes. The more important issue is how your name is listed with the Social Security Administration. If you haven't changed your name with the SSA you can still file a joint return, just make sure you use the name that matches your social security number.
Can I File a Tax Return When Married Jointly but Without My Husband's W-2?
You should gather all of your tax documentation when you get ready to file your federal income tax return, including income statements such as your 1099s and W-2s. Your employer should provide you with your W-2 by January 31. If you or your husband has not received your W-2 in a timely manner, contact the employer and request a copy. If you haven't received it by February 14, contact the IRS for assistance. You are required to file your federal income tax return by the due date, even if you haven't received your husband's W-2. You can still file a joint return. Fill out a Form 4852, Substitute for Form W-2, Wage and Tax Statement estimating your husband's income and withholding, and attach it to your return. If the missing W-2 shows up after you have filed your joint tax return, you might need to file an amended return using Form 1040X.
- Internal Revenue Service: Topic 505 -- Interest Expense
- Internal Revenue Service: Publication 550 (2011), 3. Investment Expenses
- Internal Revenue Service: Form 8606
- Internal Revenue Service: Publication 590, Nondeductible Contributions
- Internal Revenue Service: 2012 Form 1040-ES, 2012 Tax Rate Schedules
- Internal Revenue Service: Tax Benefits for Education: Information Center
- Internal Revenue Service: Here is What to do If You are Missing a W-2
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.