It’s common for married couples to file jointly on their tax returns. It’s the default choice, not just for people who try to do their own taxes but also by tax preparers. However, like most tax decisions it depends on the situation.
A person’s federal filing status is based partly on his or her marital status as of December 31. Therefore, if you were single for most of the year and got married on December 31 then you would be, for tax purposes, considered married for the entire year. If you are married but considering divorce we have information on how divorce can affect your taxes.
The IRS has a program on its site called the Interactive Tax Assistant which, after answering a few questions, helps you determine your filing status.
There are states that will deem a couple as married, even though they have not made official wedding vows. This arrangement, known as a common law marriage, will generally come about when a couple lives together for a long enough period of time, are in their right mind and hold themselves out to the public as married.
What are the Pros and Cons of Filing Married Filing Jointly?
PROS
- Larger Standard Deduction
When you file your taxes you can take either a standard deduction or you can itemize. For 2024 a single person’s standard deduction is $14,600. For couples who file married filing jointly the standard deduction jumps to $29,200.
- Certain Tax Credits Available
The government uses taxes to not only fund operations of the country but also to give incentives for taxpayers to do things. The government encourages couples to be married and join their finances and in return allows certain credits. The Earned Income Credit, Child and Dependent Care Credit, Adoption Credit and American Opportunity or Lifetime Learning Credit are all benefits that are lost if a couple decides to file separately instead of married filing jointly.
- Stronger Mortgage Application
If you are applying for a mortgage, or other types of debt, having a tax return that shows more income could help you qualify for a larger loan.
CONS
- Joint Liability
When a couple files a joint tax return each person is allowing the IRS, or State, to come after them if they cannot collect from the other spouse.
- Less Flexibility
If you file separately and then have a change of heart there is an option for you to go back and file a joint return. However, if you file jointly you can’t go back and file separately for that year after the due date of the return.
- Marriage Tax Penalty
The term “it’s cheaper to keep her (or him)” has been thrown around to describe the effects of the U.S. marriage penalty. The marriage penalty is not an actual penalty but rather an increase in tax rate or lower of a qualifying income tax threshold. The Tax Cuts and Jobs Act helped in decreasing the negative impact some married couples felt when they filed jointly. However, some differences still exist. For example, typically a married couple filing jointly who earns double what a single filer makes would both be in the same tax bracket. However, single filers hit the top tax bracket when they earn at least $609,350 while couples reach that same bracket when they earn only $731,200.
What are the Pros and Cons to Filing Married Filing Separately?
PROS
- Protection From Joint Liability
You can fight the responsibility of tax due from a filed joint return. However, filing separately is an easier, less costly option particularly if you think your spouse is not reporting all of his or her income.
- Lower Loan Payment
Some student loan payments are based on your income. Filing a separate return could allow a spouse with less income to have a lower debt payment.
- Easier To Claim Expenses
If one spouse has large medical expenses filing separately might be an option. Currently, you can take a deduction on the medical expenses above 7.5% of your adjusted gross income. You’ll have to itemize to do it but it’s probably much easier for some married couples if they file separately.
CONS
- Roth IRA Limitation
A couple who files married filing jointly can contribute to a Roth IRA if their modified adjusted gross income is less than $240,000 in 2024. However, this tax-free investment option is not available to a married couple who files separately if they earn $10,000 or more.
- Loss of Real Estate Deduction
If you actively participate in real estate you could qualify to deduct up to $25,000 from your income. However, if a couple files a joint return and lived together during the year this deduction is lost.
- Forced to Itemize
The standard deduction will give most taxpayers the biggest deduction. However, if one spouse files a separate return and itemizes on his or her return the other spouse must also itemize.
As you can see there are a variety of factors that goes in to determining which filing status is best. Whether you are about to get married, or are contemplating a divorce, it is best to consult with a tax professional to see if you can avoid any surprises.
Need tax help? Feel free to contact us.