Proper tax filing protocols aren’t always easy to understand. It’s tricky enough to fill out your tax forms when your single, but what about once you’re married?
It’s important to understand the implications of your two basic options: filing jointly or filing separately. While each method has its own perks and downsides, it’s recommended that most couples should file jointly to maximize financial benefits.
Why You Should (Almost) Always File Jointly
As the IRS explains, “If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses.” This means that filing jointly can help you save money, qualify for additional tax benefits, and enjoy a higher standard deduction rate.
If you’re not familiar with the processes involved to file jointly, here’s a quick outline:
- You’re eligible to file jointly if you were legally married by the end of the tax year
- If you have filed for divorce but don’t receive a divorce decree by December 31, you can still file jointly in the upcoming tax season
- You and your spouse report all income, deductions, and credits on the same return
- You and your spouse both accept responsibility for accuracy of the tax return
There are many essential tax benefits that you protect by filing jointly, which is why it’s the recommended method for couples who aren’t facing unique circumstances. When you file jointly, you preserve access to these tax breaks and deductions:
- Child and dependent care tax credit
- Adoption credit
- Earned Income Credit
- Roth IRA contributions
- Traditional IRA deductions
- Student loan interest deductionTax-free exclusion of Social Security benefits
There are very specific situations when it makes sense to file separately, but overall filing a separate tax return from your spouse is likely to disqualify you from these valuable tax breaks.
When You Should File Separately
You may consider filing separately from your spouse if you can relate to any of these situations:
- You will pay the same amount of taxes whether filing separately or jointly.
- Your incomes are highly disparate, and one of you has high itemizable deductions (like medical bills)
- You want to separate yourself from any omissions or overstatements your spouse intends to make on his or her tax return (filing separately separates the responsibility of accuracy and liability).
- You and your spouse have a divorce pending and want to keep finances separate.
- You or your spouse make income-driven repayment plans for student loans and want to qualify for lower monthly loan payments.
Taxes are extremely complex, so there’s no clear-cut answer for each couple. Talk to a tax advisor to sort through your financial priorities and determine the best way to file your taxes next April.
Read more on Updated Tax Brackets for 2020