Personal Financetax filing
Apr 15, 2024 05:13 AM EDT
Now that tax season has officially ended, it's never too early to start making plans for the next year. One thing you and your partner might want to consider is if you should file taxes jointly or individually.
Couples encounter this age-old dilemma every year due to the advantages and disadvantages associated with each choice. Choosing a course of action based only on a coin flip may prove to be more expensive or result in the loss of significant tax credits and deductions, thereby reducing your tax refund.
The standard deduction, for example, was $29,200 for married couples filing jointly this year, compared to $14,600 for those filing separately. According to Tim Speiss, a certified public accountant and partner at EisnerAmper in New York, it probably made more sense for couples who aren't homeowners to take the standard deduction rather than file an itemized return, thus this mattered significantly to them.
You can file two separate returns or one combined return if you're married.
When you file a joint tax return, the income from both you and your spouse are pooled. Tax brackets for combined income differ from those for single taxpayers. In order to account for inflation, the Internal Revenue Service increased the filing levels for taxes this year.
It's important to remember that filing jointly entails sharing responsibility for whatever debt you and your spouse had to the IRS before getting married.
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You have to be lawfully married by December 31, 2023, in order to submit a combined tax return in 2024. Accordingly, the IRS regarded you as married if you obtained your marriage license in 2023.
However, if you divorced or became legally separated from your husband at any time in 2023, you are deemed unmarried for the whole of the year and are not eligible to submit a joint return.
Lastly, you and your spouse must consent to file jointly. For this reason, the tax return has to have both signatures.
Scott Curley, co-CEO of FinishLine Tax Solutions, a Houston-based tax consulting firm, emphasizes the advantages of filing jointly for married couples when it comes to maximizing legitimate refunds.
Filing jointly often results in larger refunds due to the availability of more tax deductions and credits for married couples. For instance, the Earned Income Tax Credit (EITC), which can allow low-income households to deduct up to $7,430 from their taxes if they have three or more children, is typically accessible only to married couples filing jointly.
Additionally, credits such as the Adoption Credit and Child and Dependent Care Tax Credit are exclusively available for married couples filing jointly. These credits have the potential to directly reduce tax bills and result in larger refunds.
Furthermore, in order for a couple filing jointly to contribute the full $6,500 deductible IRA each year, there are far greater income requirements.
If you incurred significant out-of-pocket medical costs in the prior year, filing a separate return would be prudent. This is so that you may write off out-of-pocket medical costs greater than 7.5% of your adjusted gross income under the tax law. The 7.5% rule is applicable to your single adjusted gross income when you file jointly.
According to Speiss, filing a joint return would not be prudent in cases when one spouse's income is much lower than the other's. This is due to the possibility that the lower-income spouse filing separately will be able to claim more itemized deductions.
Additionally, if you file jointly with your spouse and they have outstanding taxes, your refund may be allocated to the amount they owe the IRS.
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