Federal income tax returns can be filed jointly or separately by married couples. Several tax breaks are offered by the IRS to couples who file joint tax returns. The vast majority of the time, it makes sense for married couples to file jointly, but there might be a few instances in which filing separately makes more sense, according to TurboTax.
Filing Jointly has its Advantages
Jointly filing your taxes with your spouse offers many advantages. The IRS offers a significant deduction for joint filers each year, which allows them to immediately deduct a significant portion of their income contributed.
The following tax credits are usually available to couples filing jointly:
- Earned Income Tax Credit
- American Opportunity and Lifetime Learning Education Tax Credits
- Exclusion or credit for adoption expenses
- Child and Dependent Care Tax Credit
Taxes and deductions for joint filers are generally higher because they have higher income thresholds.
Separated tax returns and their consequences
Couples who file separately, however, do not receive many tax benefits. The higher tax rate associated with a separate tax return can mean a higher tax bill. Although, separate filers receive a lower standard deduction than joint filers.
- Taxpayers who file separately in 2021 will only be able to take a standard deduction of $12,550, as opposed to the $25,100 available to those who file jointly.
- The deductions and credits mentioned earlier are automatically disqualified when you file a separate return from your spouse.
- The IRA contribution deduction is usually limited to a smaller amount for separate filers.
- Student loan interest cannot also be deducted.
- Separately filed capital loss deductions are limited to $1,500 each, rather than $3,000 on a joint return.
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Separate Filings When Applicable
You may save money by filing separately in rare situations.
- For instance, you or your spouse may be eligible for tax relief if you have big out-of-pocket medical expenses. Due to the IRS’s policy of only allowing deductions for costs that exceed 7.5% of adjusted gross income (AGI), most of your expenses may be difficult to claim if you and your spouse have a high AGI.
- As an example, suppose you have $50,000 in earnings and $10,000 in medical expenses. This amounts to 7.5% of your income ($10,000 times $50,000, or 20%).
- In contrast, if you and your spouse make $135,000, then you would not be able to claim these medical expenses ($10,000 ÷ $135,000 = 7.4% of your income).
- Having to file separate returns in such a situation may be beneficial if it allows you to apply the threshold to just one of your incomes and claim more of your medical deductions.
You can find more information about when you should file separately at “When Married Filing Separately Will Save You Taxes.”
How to Decide Which Status to Use
It is best to prepare your tax return both ways if you don’t know if you should file jointly or separately with your spouse. Look at your net refund or balance due from each method after double-checking your calculations and making a concluding choice.
To help out, as part of preparing your return with TurboTax, the software help calculate the best filing status for your situation and recommend it to you. With TurboTax, you’ll just have to answer a few simple questions about your life, and it will make sure you fill out all the needed tax forms. Whatever your tax situation, TurboTax will ensure that your taxes are done right, whether they’re simple or complex.
