Posted by Carmen Garcia

Tax Advantage of Married Filing Jointly

Tax Advantage of Married Filing Jointly

While the separate filing of tax is a good idea and comes with its advantages, filing jointly brings about significant tax breaks in addition to being a simple method. We compiled this article to examine some of the pros and cons of married filing jointly.


1. More Tax Credits

Filing with the married filing jointly (MFJ) status enables you to claim more tax credits like:

  • The adoption credit

  • The American Opportunity Tax Credit alongside other tax breaks for education

  • The Earned Income Tax Credit

  • The Child and Dependent Care Credit

This filing status also does not restrict other tax advantages like deductible contributions to retirement savings, the Child Tax Credit, etc. With this, when you consider the tax liability perspective, MFJ is a terrific choice. 


2. Retirement Contributions

For people that want to make a tax-deductible contribution to their IRA, there are grievous filing requirements to the joint filing. Since Uncle Sam determines your maximum deductible contribution from your AGI, the risk of losing your deduction is lower for single filers compared to joint filers. 

Bear in mind that for single filers, the standard deduction is $12,200 and 24,400 for joint filers. Many people will find out that the joint filing alongside the $24,400 translates to a lower tax bill. 


3. Itemizing Your Returns

Itemizing deductions come with some complications compared to the standard deduction. You can, however, get a lower tax bill if you have considerable itemized deductions. For separate filers with any of the party itemizing, both must itemize. Should any one of them have plenty deductions, there could be more tax debt for the spouse claiming itemized deductions translating into more tax debts


Should You Worry About the “Marriage Penalty?” 

There is the concept of “Marriage Penalty," which might make some taxpayers worry about the tax implications after marriage. The Marriage Penalty is a term used when married couples pay more taxes than they would when single.

As the years go by, several aspects of the tax code have a marriage penalty. For instance, before the onset of TCJA, taxpayers in the mid to upper tax brackets had a marriage penalty. The reason is that the range for married couples at the specified levels was not twice the equivalent bracket for a single individual. From 2018, tax brackets for joint filers were double that for single filers. 

The concept of the marriage penalty is real in many aspects of the tax code. For instance, there is a $2,500 limit on deductions of student loans for every return. Two single persons, filing will be able to claim up to $2,500, giving a combined return of $5000. They will, however, be restricted to a $2,500 deduction if they married and filed jointly. 

The marriage penalty also finds application in the deduction for local and state taxes. From 2018 tax returns, there is the opportunity to deduct as much as $10,000 of local and state taxes paid. This limitation applies to the entire property tax, which could be income or state. Married and single filers enjoy the same limit. As a result, two single filers can claim as much as $10,000, giving a total deduction of $20,000. On marrying, they are restricted to a $10,000 deduction on the joint return. 


Conclusion

If you are confused about the best filing status that suits you, make sure to consult your tax pro. On the other hand, your tax preparation software can help decide the best approach for you. There are impressive tax programs that can compare joint and single marriage filing, revealing the saving of each option.

There is also the opportunity to calculate your tax using each filing status and see which translates to a lower tax bill. Most couples have discovered that they are better off filing jointly. 

Even though many separating couples file separately, you can claim the head of the household status. This is possible if you have been living apart for the last six years. This will make you qualify for more deductions and credits. 

There is an option to review your filing status if you believe you filed with the wrong status. Changing from joint to married filer is possible, provided you do it before the original due date. The amendment is possible for up to three years from the original due date of the return. This does not include an extension. 


Carmen Garcia
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