Should You File Your Taxes Jointly With Your Spouse?
Posted by: Brookside Admin
Deciding on your filing status is one fo the first steps when preparing your tax return. There are five filing status options and each comes with a different requirements, standard deductions and eligibility for tax credits. Your choices are Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) with Dependant Child. At Brown Kinion and Company, we're able to help you decide which filing status will net you the best tax refund. While most situations dictate that married couples are best off filing jointly, that isn't always the case. Kay Bell of Bankrate explored this issue and offered advice for which filing status is best for you and your spouse. Here we outline when it's best to file jointly and when it's best to file separately.
- Why you should file jointly
Typically, your marital status on the last day of the year determines your eligibility for filing statuses. In most cases, you're better off filing jointly when eligible. Couples filing jointly enjoy better tax rates, particularly in the higher tax brackets. Spouses filing separately will be hit with higher tax rates at a lower income than single filers. There are also a number of tax credits and deductions couples filing jointly are eligible for that are forfeited when couples file separately. To name a few, filing separately means you can't take the earned income credit, or claim adoption expenses or childcare costs or use educational tax credits. The amount of capital gains losses you can deduct is half of what you're eligible for when filing jointly.
- Why you should file separately
Under some circumstances, filing separately does allow for more tax savings. If you meet the 10-percent of adjusted gross income threshold for medical costs, you can itemize those costs. So, if those medical bills belong to one spouse, they are more likely to hit that threshold by filing separately. Another good time to file separately is if a spouse is dishonest on their tax return. When filing jointly, both spouses are legally liable for everything contained in the return. Filing separately could save you from legal trouble. While innocent spouse protection is offered by the IRS in some cases, the best option is to avoid liability all together.
Changing your filing status can have a profound impact on your tax refund. To ensure you choose the right filing status and correctly complete the rest of your return, call Brown Kinion and Company for help.