Filing As a Couple Or Separate - Tax Professionals Member Article By Abundant Wealth Planning LLC
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Filing As a Couple Or Separate

Filing As a Couple Or Separate

Married couples can file federal income tax returns jointly or separately. The IRS encourages couples to file joint tax returns, extending several tax breaks to those who file jointly. In most cases, couples should file jointly, but there may be cases where it is preferable to file separate returns.


The benefits of filing jointly

There are several advantages to filing a joint tax return with your spouse. Joint filers receive one of the highest standard deductions each year, allowing them to deduct a significant amount of income when calculating their taxable income.

Couples filing jointly can often benefit from various tax credits, such as:

  • Lifetime Learning Education tax credits and American Opportunity 

  • Child and dependent care tax credit

  • Earned income tax credit (EITC)

  • Exclusion or credit for adoption expenses

Joint filers are often granted higher income limits for certain taxes and deductions, meaning they can earn more and still qualify for certain tax breaks.


Consequences of filing separate tax returns

On the other hand, couples filing separately generally benefit from fewer tax advantages. Separate tax returns can result in multiple taxes.

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

  • If you file separately from your spouse, you will often be automatically disqualified from many of the tax credits and deductions listed above.

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

  • They also cannot deduct interest on a student loan.

  • The capital loss deduction cap is $1,500 each when filed separately instead of $3,000 when filed together.

The best way to find out if you should file a joint or separate tax return with your spouse is to prepare your returns both ways. Check your calculations, then note each method's net refund or balance.

 

When can you file a separate return?

In rare cases, filing a separate tax return can help you save on taxes.

If you or your spouse have a large amount of out-of-pocket medical expenses, and because the IRS only allows you to deduct the amount of those expenses that exceed 7.5% of your adjusted gross income (AGI) for 2021, it may be difficult to claim the bulk of your expenses if you and your spouse have a high AGI.

For instance, if you have $10,000 in medical bills and earned $50,000. This would meet the 7.5% threshold ($10,000 ÷ $50,000 = 20% of your income).

If you earn $135,000 combined, this prevents you from claiming medical expenses ($10,000 ÷ $135,000 = 7.4% of your total income).

Filing separately in such a situation may be helpful if you can claim more medical deductions by applying the limit to only one of your incomes.

Both spouses must make the standard deduction or itemize their own deductions if filing separately. One spouse cannot itemize their deductions, and the other takes the standard deduction.

One spouse can only use each deduction when itemizing deductions, even if both spouses pay the expenses. The deduction can be split separately between filing spouses as long as the total claimed by both spouses does not exceed the total deduction.


Deciding which filing status to use

The perfect way to find out if you should file separately or jointly with your spouse is to prepare the taxes both ways. Check your calculations, then note each method's net refund or balance. If you employ the services of a tax professional to prepare your tax return, they'll do the math for you and recommend the filing status that offers the most tax savings.

Remember that with the help of a tax specialist, they will ask you simple questions about your life and help you complete all the appropriate tax forms. You can be sure that your taxes are done right, from simple to complex tax returns, whatever your situation.


Bottom Line

For the 2021 tax year, most couples under 65 filing jointly receive a standard deduction of $25,100, while couples filing separately receive a standard deduction of $12,550.

Joint filers are often granted higher income limits for certain tax breaks, such as deducting IRA contributions.

If you are married and filing separately, you may need to pay a higher tax rate and pay more taxes.

Filing separately can be advantageous if you have many out-of-pocket medical expenses. It may be easier to meet the 7.5% adjusted gross income threshold to qualify for medical deductions if you only claim one income.


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