Which is better for couples, filing jointly or separately?
My husband and I married in November of 2012. We both have jobs, and our house and the mortgage on it is in my husband’s name. How do we decide if we should file together or file separately?
If you are married, you have a choice of how to file your tax return.
Usually the most beneficial filing status is married filing joint (MFJ) and married filing separately (MFS) is usually the most expensive filing method resulting in higher tax liabilities.
In general, the tax rate for MFS is higher than MFJ, rendering a higher total tax liability.
If you are using a tax preparer ask them to run the figures both ways.
If you are doing your own taxes with a tax program there probably is a tool to do this for you.
It is very rare for a couple using the MFS status to be successful in lowering their tax bill.
The MFS status disallows the earned income credit, child and dependent care credit, education credits, exclusion or credit for adoption expenses.
If you lived with your spouse at any time during the tax year, you cannot take the credit for the elderly or disabled.
If your spouse itemizes deductions you must also itemize deductions.
Since your spouse owns the home in which you both reside, he may possibly deduct the mortgage interest, property taxes, etc., leaving you with considerably less than the standard deduction to reduce your taxable income.
Many of your allowances and deductions are slashed in half. The capital loss deduction is reduced from $3,000 to $1,500.
Your exemption amount for figuring the alternative minimum tax is half what it would be on a joint return.
And the child credit and retirement savings contribution credits are also cut in half, your spouse, of course, gets the other half, if he or she qualifies.
You both lose the deduction for student loan interest.
If you lived with your spouse at any time during the year, you will have to include a higher percentage of Social Security benefits or railroad retirement benefits in your income.
If you feel the MFS is a better tax deal for you, go ahead and file that way.
Down the road you may find that was not such a good decision. In that case you will be able to amend those returns to MFJ going back three years.
However if you file a joint return you cannot go back and amend it to MFS. (There is an exception to this rule for surviving spouses.)
This is a very brief overview of the two filing options. More information can be found in IRS publication 501 or by consulting a tax professional.
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