Marriage comes with many joys to experience with your partner as well as many new responsibilities. Figuring out how to do finances as a couple is one of the biggest learning curves you will face in a relationship, especially when it comes to filing taxes together.
With your new married status, you are no longer able to file as “single.” Instead, you now have to choose between “married filing jointly” or “married filing separately.”
While “married filing jointly” is usually the best option for most couples, there are instances when it can be better to do “married filing separately.”
But what are the main differences, and when should you choose one over the other? Read on to learn more.
Married Filing Jointly
When you choose “married filing jointly,” you and your spouse are filing a tax return together. That means you and your spouse will combine your income, deductions, and credits in one tax return with the same tax rate.
This also means you are both held accountable for the taxes, interest, and penalties from the IRS.
While this may sound intimidating, there are many benefits to filing this way as a couple.
Requirements
To file as “married filing jointly,” you and your partner must be married by December 31 of the tax year and agree to file a joint return together. You will both have to sign the tax return.
This filing status is also available to people who live separately but are not legally separated, as well as taxpayers whose spouse died during the year and did not remarry.
Advantages
One of the top advantages of “married filing jointly” is that the lowest tax rates are applied to this status. Your return also has a higher standard deduction and may qualify for tax credits and deductions that aren’t available if you file separately.
Married Filing Separately
Requirements
If you want to use the “married filing separately” status, you and your partner will also have to be married by December 31 of the tax year. However, you will not have to file a tax return together or combine your income, deductions, and credits.
Disadvantages
The “married filing separately” status usually has fewer advantages for married couples than “married filing jointly.”
There are often fewer tax benefits and deductions, resulting in more taxes paid.
When You Should File Separately
While “married filing separately” has its limitations, it does make sense for some couples.
Medical expenses: If either spouse has significant out-of-pocket medical bills, it may make sense to file separately instead. That’s because filing separately can help surpass the IRS threshold to deduct medical costs. This amount is based on a percentage of your Adjusted Gross Income, which would be lower if you chose to file separately.
Student loans: When your student loan repayments are based on your income, it may make more sense to file separately. By filing separately, you can reduce your payment obligation. However, you may also lose education tax credits by not filing jointly, so carefully weigh the benefits.
Separate finances: In the event you and your partner keep your finances separate, this status can create a financial division. This can make sense if you are preparing for a divorce.
Protection against liability: If you are hesitant about filing jointly with your spouse, you are under no obligation to do so. After all, both partners must consent to choose “married filing jointly.” If you suspect your spouse is misfiling their taxes or committing tax fraud, you can protect yourself against the repercussions by filing separately.
Feel Confident In Your Filing Status
If you’re not sure which filing status is the best for your situation, you can talk with the team at AMG Finance. Our tax prep professionals will listen to your situation and walk you through your options.
When you’re ready to file, our tax preparation services make the process simple and easy. Getting married can significantly change your tax situation, so we can take the pressure off and file them for you.
Ready to get started? Visit a local branch today.
