If you've recently tied the knot and are about to tackle your taxes together for the first time, there's a lot to consider. A key financial test of your new relationship will be taxes and experiencing filing together for the first time. As you work on your taxes, remember that communication is the key to choosing the best filing status.
Gather and Discuss Paperwork
Just as you did when you were single, your first step in filing taxes is to gather your W-2s, 1099s, last year’s tax returns and documentation of any business or other large expenses. Once each partner has gathered these forms, have a discussion. Share how much you each earned, whether any earnings were from self-employment and how much interest you paid in student loans. Next, discuss expenses; if you had large medical expenses, purchased a home or gained other assets that may affect your taxes, make a list of these. Finally, list any donations that you made or money you put in a retirement account, both of which could affect your taxes.
When to File Jointly
For many married couples, filing jointly can be hugely beneficial as it allows you to claim numerous tax credits that are unavailable to couples who are unmarried or married and filing separately. In most cases, the total taxes that you and your spouse owe will be lower when filing jointly than separately. Some credits that married couples are entitled to are the child and dependent care credit, the adoption expense credit, and the hope and lifetime learning credit for student loan interest. Filing jointly can also save you time and expenses that could be incurred by filing separately. Remember that by filing jointly, you are held equally responsible for any tax liability.
When to File Separately
The main benefit of filing separately is that one spouse will not be considered liable for taxes the other spouse owes. In other words, if your spouse owes taxes or has other financial obligations, your refund won’t be reduced. Consider filing separately if you or your spouse have unpaid child support, have defaulted on a student loan or are guilty of tax fraud. Another reason to file separately is if you or your spouse have substantial uncovered medical expenses that exceed 7.5 percent of the individual's adjusted gross income. Additionally, if either of you have numerous miscellaneous deductions such as union dues or business expenses, filing separately may reap more rewards. Remember that both you and your spouse must use the same system when claiming deductions. If your spouse itemizes, you must itemize as well, even if your taxes owed would be lower if you took a standard deduction.
To make sure you choose the most advantageous filing status, calculate your taxes separately and jointly to see which results in the lowest total tax. After you’ve filed your return, use it to help you consider how you can best make financial decisions that will benefit next year’s taxes. If you’ll receive a refund, decide where you might invest it or how you might best save it. If you filed on your own and the process was confusing or difficult, consider working with a professional next year.
Megan Martin has more than 10 years of experience writing for trade publications and corporate newsletters as well as literary journals. She holds a Bachelor of Arts from the University of Iowa and a Master of Fine Arts in writing from The School of the Art Institute of Chicago.