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Can You Be Married And File Taxes Separately

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When Married Filing Separately Will Save You Taxes

Should married couples file taxes jointly or separately? Here’s what an expert says

OVERVIEW

If you’re married, there are circumstances where filing separately can save you money on your income taxes.

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The IRS considers taxpayers married if they are legally married under state law, live together in a state-recognized common-law marriage, or are separated but have no separation maintenance or final divorce decree as of the end of the tax year.

Of the 150.3 million tax returns filed in 2016, the latest year for which the IRS has published statistics , 3.07 million belonged to twosomes who filed separately.

  • These partners reported individual income and expenses on separate tax returns.
  • They had to agree on either both itemizing expenses or both using the standard deduction.
  • If they had similar incomes, filing separately and using their various deductions or medical expenses likely helped them save taxes.

Should You And Your Spouse File Taxes Jointly Or Separately

OVERVIEW

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Key Takeaways

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

Joint filers usually receive higher income thresholds for certain tax breaks, such as the deduction for contributing to an IRA.

If youre married and file separately, you may face a higher tax rate and pay more tax.

Filing separately may be a benefit if you have a large amount of out-of-pocket medical expenses. It may be easier to reach the 7.5% threshold of your adjusted gross income to qualify for medical deductions if you only claim one income.

Is It Better To File Separately Or Jointly If Married

As a result, the tax rate may be lower. By joining together as husband and wife, married couples are more likely to gain financial advantage. TurboTax tax expert Lisa Greene-Lewis tells the story of one married couple who was filing their taxes jointly after their partners tax return went into effect, and getting some tax benefits when it did.

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Can I File Separately If I Am Married And Filed Jointly In Previous Years

Can I file married filing separate after filing married filing jointly in previous years? Yes, you may file as Married Filing Separately even if you filed jointly with your spouse in previous years. However, Married Filing Separately is generally the least advantageous filing status if you are married.

How To Choose The Proper Filing Status For Your Tax Return

Tax Season Guide: Married Filing Jointly vs. Separately

Obviously, choosing a filing status is an easy decision in some cases. If you are unmarried and do not provide care or living expenses for anyone else, then you will use the single filing status. You will want to use the head of household status if you are unmarried and provide care or living expenses for a legal dependent or parent. Similarly, if you are a qualifying widow or widower, then that is the status you should select. However, if you are married, then choosing between married filing separately vs jointly can sometimes be a difficult decision.

In most tax situations, you will be better off selecting the married filing jointly status. One of the situations in which you might need to file separately is if you have no children, one spouse has substantially higher taxable income, and the spouse with the lower income has large itemized deductions like medical expenses for the year. In that case, it might make sense for you to file separately, even if you file jointly every other year. As mentioned before, you can choose a different status in different years, so you should consult your tax professional to determine if filing separately makes sense in your situation.

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Filing Separately To Guard The Future

When you don’t want to be liable for your partner’s tax bill, choosing the married-filing-separately status offers financial protection: the IRS won’t apply your refund to your spouse’s balance due. Separate returns make sense to prevent the IRS from seizing a spouse’s tax refund when the other has fallen behind on child support payments.

Couples in the process of divorcing may shun joint returns to avoid post-divorce complications with the IRS, while a spouse who questions her partner’s tax ethics may feel more comfortable living a separate tax life.

Couples living in community-property states should consider state law when deciding how to file.

Remember, with TurboTax, we’ll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.

How Do Married Couples Split Tax Refund

There is no precise way to do this, because everything on a married joint return is calculated together. One solution is to prepare two married filing separate returns, figure out refunds based on that, and then apportion the actual refund based on that percentage. … Example: Married joint return has refund of $1400.

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Using Miscellaneous Deductions By Filing Separately

Miscellaneous deductions can lower taxable income, but in order to enter them on Schedule A, they must add up to more than 2% of adjusted gross income .

  • Spouses with union dues, job-search costs, tax-preparation fees and un-reimbursed business expenses may find their miscellaneous deductions don’t qualify when their higher combined income raises their AGI.
  • A spouse who travel frequently for business could rack up a sizable tally in airline fees for baggage and itinerary changes that makes the miscellaneous deduction worth pursuing.

Beginning in 2018, these types of miscellaneous expenses are no longer deductible.

The Benefits Of Married Filing Separately

When Married Filing Separately Will Save You Taxes – Presented by TheStreet + TurboTax

While the tax code encourages married couples to file their tax returns jointly, there are a few scenarios where married filing separately could be beneficial.

These include when both spouses have about the same amount of income and when combining income pushes a couple into a higher tax bracket. Other scenarios where married filing separately might make sense include the following.

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The Bad Effects Of Filing Separately

Usually, a couple will pay more in taxes by filing separately. One reason is the way the tax brackets are set when filing separately, it’s much easier for one spouse to reach the higher tax brackets. Another problem is that if you choose married filing separately status is that you lose or limit a lot of potential tax breaks such as tax deductions, , or exclusions. These include the child tax credit, the adoption credit which covers adoption expenses, the Earned Income Tax Credit, tax-free exclusion of U.S. bond interest, tax-free exclusion of Social Security benefits, the credit for the elderly and disabled, the deduction for college tuition expenses, the student loan interest deduction, the American Opportunity Credit and Lifetime Learning Credit for higher education expenses , the deduction of net capital losses, traditional IRA deductions, and Roth IRA contributions. Losing these tax benefits is very hard on most taxpayers. While your ability to contribute to IRAs isn’t completely lost, it is severely curtailed – especially with Roth IRAs.

You Have A Lot Of Itemized Deductions

Deductions can be a major boon at tax time, since they reduce your taxable income. But the IRS limits how much you can write off based on what you make. If one or both of you has a substantial amount of deductions to claim and theres a pretty sizable gap in what you earn, filing separate returns can get you both the full amount of tax benefits.

For example, lets say you experienced a serious illness or injury and you racked up some big out of pocket medical expenses. You can then deduct the amount that exceeds 7.5% of your adjusted gross income. If you earn $25,000 but your spouse earns $150,000, combining your income on your taxes is going to significantly reduce the tax benefit youd get from the deduction, if you were able to claim it all. In this case, going solo would probably yield the bigger advantage.

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American Opportunity Tax Credit

The American Opportunity Tax Credit helps offset costs for post-secondary education. It was introduced in 2009 and requires that couples filing jointly have a modified adjusted gross income of no more than $160,000 to be eligible for full credit. Couples who make $160,000 to $180,000, meanwhile, can apply for a partial AOTC.

The maximum reward is an annual credit of $2,500 on qualified educational expenses for the first four years that a student attends an approved postsecondary institution.

Tax Rules For Married Couples Who Live Separately

Married Couples: Is It Better to File Taxes Jointly or Separately?

Generally, taxpayers who file using the head of household filing status receive greater tax benefits than single taxpayers or married taxpayers who file separately. As long as both spouses agree to file their taxes jointly, and they are still legally married on Dec. 31, the IRS allows them to file their taxes as married taxpayers filing jointly. The IRS considers the spouses as legally married if they have not received a final decree of divorce. The IRS defers to a states definition of legally married, and spouses who were married at common law pursuant to their states marriage laws can file their taxes as married taxpayers. However, only opposite-gender spouses can file their taxes as married taxpayers, even when their states recognize civil unions and same-sex domestic partnerships.

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Quirks In State Law Can Trip You Up

Be aware of sensitive areas of state tax law. They can cost you.

For example, in Anne and Jacks case, the couple will have to take care if Anne plans to claim a homestead exemption on her Florida residence. Because the exemption is a valuable one, Florida tax authorities tend to take fairly aggressive positions as to who is eligible to claim it.

Florida allows only one homestead exemption anywhere per individual or family unit. In a 2016 court case, a wife claimed an exemption on a home she solely owned in Florida, while her husband claimed a homestead exemption for a home he solely owned in Indiana. Each spouse was a legal resident of the state where they claimed their respective exemption.

However, the court found that because the couple comingled their finances, the wife was receiving the benefit of her husbands exemption, even though she did not jointly own his Indiana house. Instead of claiming homestead exemptions in both states, Jack and Anne should decide which exemption is more valuable and forgo the other one.

Especially for long-term separations, you may also need to consider the potential impact on your estate planning because some states impose own estate or inheritance taxes. Jack and Anne are lucky neither Georgia nor Florida imposes such a tax.

Rebecca Pavese, CPA, is a financial planner and portfolio manager with Palisades Hudson Financial Groups Atlanta office.

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How To Decide Which Filing Status To Use

The best filing status will depend on your individual situation. Most people benefit from filing married filing jointly since tax rates can be lower, and there are more tax deductions and credits available when you file married filing jointly. You can use our free TurboTax TaxCaster, to estimate your overall tax picture and tax refund if you file married filing jointly or married filing separately before you file. At tax time, TurboTax will guide you through choosing the right filing status for your situation.

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Is It Better To Claim 1 Or 0

By placing a â0â on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period. If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period. … If your income exceeds $1000 you could end up paying taxes at the end of the tax year.

I Am Married But My Spouse And I Live Apart And We Do Not File A Joint Tax Return Instead I Use The Married Filing Separately Tax Filing Status I Have Low Income And Need Help Paying Health Insurance Premiums Can I Qualify For Premium Tax Credits

Should Married Couples File Taxes Separately or Jointly?

Generally no. Married taxpayers are required to file a joint tax return in order to qualify for premium tax credits. People who use the married filing separately status are not eligible to receive premium tax credits There is a special exception, however, for individuals who must file separately because of domestic abuse or spousal abandonment.

For other married individuals who do not file a joint return, there may be other options.

If you have a dependent and meet certain conditions, you may be able to use the head of household filing status. People who file a tax return using this filing status can qualify for premium tax credits.

In addition, if you expect to be divorced by the end of the tax year, you will be able to file as a single taxpayer for that year and could qualify for subsidies under that filing status when you file your taxes. However, you may not be able to receive all of the premium tax credit that youre entitled to in advance if you are not yet divorced with you make your Marketplace application. Except in cases of domestic abuse or spousal abandonment you should not say on your application that you are unmarried when you are still married.

Check with your tax adviser or a health insurance Marketplace Navigator for more information.

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Which Filing Status Will Save You Income Taxes

As a result of the Tax Cuts and Jobs Act, the tax rates in effect during 2018 through 2025 for married taxpayers filing separate returns are exactly half those for marrieds who file joint returns. Nevertheless, most married people save on taxes by filing jointly, particularly where one spouse earns most or all of the income. This is because filing jointly shifts the high earner’s income into a lower tax bracket. If spouses earn about the same income, there should be little or no difference in their tax rates whether they file jointly or separately. The only way to know for sure if you’ll pay more or less taxes by filing separately or jointly is to figure your taxes both ways. This isn’t hard to do if you use tax preparation software.

What Are The Benefits Of Filing Jointly

There are many benefits to filing jointly. In general, you are eligible for a higher standard deduction and you can take advantage of multiple tax credits. Couples with children often receive even more deductions and tax advantages by filing a joint return. Regardless of your filing status, the due date for your return will remain the same. Even if you have a deferred tax liability, your taxes will be due on the same date whether you file jointly or separately.

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Tax Tips For Women Going Through Divorce

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The American poet Ogden Nash once wrote, Indoors or out, no one relaxes in March, that month of wind and taxes.

Considering the headlines out of the Midwest last week, March 2012 is unfortunately proving him right. This month can be tumultuous on many fronts, and for women going through divorce, tax season can be particularly difficult both emotionally and financially.

In an effort to calm at least part of the storm, here are answers to some of the tax questions most divorcing women must grapple with:

What is my tax filing status?

Your federal income tax filing status is set by your marital status on the last day of the tax year.

So, if you are still married on December 31st, then you are considered married for the entire year. Likewise, if you are divorced on December 31st, then you are considered divorced for the entire year.

That part is relatively easy, but if you are legally separated, things are more complicated. Heres why:

What responsibility do I have if I sign a joint tax return?

What happens if we file jointly, and theres an overpayment of taxes?

One last word of caution

File Separately For High Expenses

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If you and your spouse have very different incomes and very different expenses, it might be worth filing separately.

For instance, say one spouse makes $40,000 and spent $5,000 on medical care. The other spouse earned $70,000 and spent just $1,000 on health care. Their combined expenses come out to $6,000 on $110,000 of combined income a combination of medical and income numbers that’s too small to deduct on their tax return.

If this couple files separately, however, the first spouse will have spent 12.5% of their individual income on medical expenses, and will be able to deduct it.

The same applies if one of you is in an income-based loan repayment program. Filing separately may mean lower monthly payments, Betterment notes, because the lender won’t consider both partners’ income in the calculation.

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