Certain life happenings, such as getting married, will prompt you to change the tax filing status.
While it may initially feel like a chore, it’s a straightforward process. Depending on your circumstances, married filing jointly or separately can save you money in the coming tax season.
Your filing status determines important factors such as tax rates and standard deduction, which is the amount of income that’s not subject to federal income tax.
Therefore, having the right filing status can help you get the biggest refund.
Changing your status is simple. All you have to do is alter your filing status when you submit your tax return. If you’d like to make changes to the amount of tax you’re withholding per paycheck, you can submit a new W-4 to your employers.
What you need to know is that you can do this throughout the year, not just when you file taxes. Before making the change, you must first determine your eligibility for the various filing statuses. For married persons with a living spouse, there are two ways to file:
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- Married filing jointly (MFJ): To file jointly means you file a single return, which will include the income and deductions for both spouses.
- Married filing separately (MFS): taxes married filing separately means each person files their own return, keeping incomes and deductions separate.
Here’s what experts have to say about filing jointly versus separately, plus advice on how to decide what’s right for you.
The Benefits Of Changing Your Status To Married Filing Jointly
Filing joint typically provides married couples with the most tax breaks. Tax brackets for 2020 show that married couples filing jointly are only taxed 10% on their first $19,750 of taxable income, compared to those who file separately who only receive this 10% rate on taxable income up to $9,875.
Additionally, the IRS offers spouses who file jointly one of the biggest standard deductions each year. In 2019, the standard deduction for a married pair jointly is $24,400.
Conversely, for those filing separately, the tax break is just $12,200, which is the same as for single people.
Another reason to consider filing jointly vs separately is that joint filers are often eligible to receive meaningful savings in the form of tax credits, such as:
- The Earned Income Tax Credit (EITC) which is designed to ‘benefit for working people with low to moderate-income’. Here’s how to know if you and your spouse qualify, as per the IRS.
- Reimbursement or refund for adoption expenses when legally adopting a child.
- The Child and Development Care Tax Credit, which can help offset your child-care costs if you are working and must pay a caregiver to look after your child or a disabled spouse.
As long as you were married by December 31, 2019, you are eligible to file taxes jointly.
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What’s The Advantage Of Filing Separately?
While it’s almost better to file jointly because of a lower tax responsibility overall, there are very specific situations when it pays to submit separate returns.
Are you thinking can married couples file taxes separately at all?
Here are four situations where filing separately would be the best option:
You or your spouse have high or unpaid student loan debt
If one of you have defaulted on your student loans, meaning you haven’t paid on them in 270 days or more, you should consider filing separately.
That’s because, in this case, your joint tax refund could end up being rerouted through the Treasury Offset Program and put toward the unpaid debt, meaning neither of you would get a refund.
However, if you had failed separately, at least one of you would have a refund.
If you have federal student loans and are on an income-driven plan, meaning the amount you pay on your loans each month is based on your salary, it might make sense to consider filing separately from your spouse.
That way, their income is not considered in the repayment calculation.
One of you has excessive medical bills
When you or your partner get sick, you can generally deduct your medical expenses above a threshold of your income.
In 2019, the IRS allows taxpayers to deduct qualified unreimbursed medical care expenses for the year that exceed 7.5% of your adjusted gross income (AGI).
If both you and your spouse earn an income and you file jointly, your medical expenses would have to be higher in order to be able to make any deductions.
But when confused between married filing jointly vs separately, in this case, going separate is the best option. Your tax return reflects just one or your salaries- you will reach the threshold faster and be able to deduct more of those expenses earlier on.
If you would save more on taxes by filing separately
To find out which status would benefit you the most, you can run a side-by-side comparison-or have your tax preparer run it for you- with the outcomes of each filing status.
You are allowed to choose the status that most benefits you, and you can choose a different status each year by making the same assessment each time.
If you’re still unsure of which status makes the most sense for you, you should consider getting advice from a qualified CPA.
You need a proper understanding of what you should do or whether you should change the status since there are variables in the decision.
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