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Should You and Your Spouse File Taxes Jointly or Separately?

Married couples have the option to file jointly or separately on their federal income tax returns. The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it's best for married couples to file jointly, but there may be a few instances when it's better to submit separate returns.

Advantages of filing jointly

There are many advantages to filing a joint tax return with your spouse. The IRS gives joint filers one of the largest standard deductions each year, allowing them to deduct a significant amount of their income immediately.

Couples who file together can usually qualify for multiple tax credits such as the:

  • Earned Income Tax Credit

  • American Opportunity and Lifetime Learning Education Tax Credits

  • Exclusion or credit for adoption expenses

  • Child and Dependent Care Tax Credit

Joint filers mostly receive higher income thresholds for certain taxes and deductions—this means they can earn a larger amount of income and potentially qualify for certain tax breaks.

Consequences of filing your tax returns separately On the other hand, couples who file separately receive few tax considerations. Separate tax returns may give you a higher tax with a higher tax rate. The standard deduction for separate filers is far lower than that offered to joint filers.

  • In 2021, married filing separately taxpayers only receive a standard deduction of $12,550 compared to the $25,100 offered to those who filed jointly.

  • If you file a separate return from your spouse, you are automatically disqualified from several of the tax deductions and credits mentioned earlier.

  • In addition, separate filers are usually limited to a smaller IRA contribution deduction.

  • They also cannot take the deduction for student loan interest.

  • The capital loss deduction limit is $1,500 each when filing separately, instead of $3,000 on a joint return.

When you might file separately....

In rare situations, filing separately may help you save on your tax return. For example, if you or your spouse has a large amount of out-of-pocket medical expenses to claim and since the IRS only allows you to deduct the amount of these costs that exceeds 7.5% of your adjusted gross income (AGI) in 2021, it can be difficult to claim most of your expenses if you and your spouse have a high AGI.

  • For example, if you have $10,000 in medical expenses and made $50,000. That would meet the 7.5% threshold ($10,000 ÷ $50,000 = 20% of your income).

  • Whereas, if together you make $135,000, this would disqualify you from claiming these medical expenses ($10,000 ÷ $135,000 = 7.4% of your income).

  • Filing separate returns in such a situation may be beneficial if it allows you to claim more of your available medical deductions by applying the threshold to only one of your incomes.

Deciding which status to use

The best way to find out if you should file jointly or separately with your spouse is to prepare the tax return both ways. Double check your calculations and then look at the net refund or balance due from each method.

Remember, with Facts & Figures , we'll ask you simple questions about your life and help you fill out all the right tax forms. You can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation. Schedule your Consultation Today!

Source: Should you and Your Spouse File Separately |

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