If you’re married chances are that you file a joint tax return with your spouse. In fact nearly 95% of couples file jointly typically because it’s cheaper than filing separately. So if that’s the case why would anyone file separately?
As USA Today recently highlighted there are a few instances where it may actually make more sense to file separately. Before we jump into those reasons it should be noted that the option may not even be available in your state. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are what’s known as community property states and thus filing separately is fairly pointless. However, for couples outside of those states, here are some examples of when you might want to consider filing separate tax returns:
You’re going through a divorce
This example may be the most obvious but if you’re in the process of divorcing your spouse you may want to file separately. Beyond the impracticality of having to exchange forms and documentation it doesn’t make a whole lot of sense to file a joint return at time when the rest of your finances are being split. Additionally, if you have any other reason to be suspicious of your spouse, you’ll want to file separately as you could be implicated for any wrong doings or errors.
There are reasons to split your income
Household income and personal income could be two very different things and there could be legitimate reasons why you wouldn’t want your spouse’s income to reflect on yours. For example some student loans are based on income and your rate could rise dramatically if your combined income were considered instead of the sole income of the borrower. As certified planner Carrie Houchins-Witt stated, “They might end up owing an extra $1,000 on their tax return, but if they’re going to save $400 a month on their student loan payments, then it makes sense to do that.”
Similarly there are limits to how much in medical expense you can deduct on your taxes. Typically only expenses that are more than 10% of your adjusted gross income are deductible which means that, if you make more money, there is less that you’ll be able to deduct. If one spouse has a lot of medical bills and makes less than the other spouse it might be worth doing separate returns in order to deduct the medical expenses.
You make a lot of money
A lot of times high earners will want to use itemized deductions in order to get the best returns. However the IRS places limits on itemizations for joint filers with a combined adjusted gross income in excess of $309,900. Once again you may be able to get around that by filing separately instead but there are a few hiccups in that plan. First if one spouse files using itemization instead of standard deduction then the other must as well. Secondly keep in mind that you will need to determine who gets to claim each deduction so that you don’t double up.
While it may be rare, there are times when it may make sense for married couple’s to file separate tax returns (assuming that option is open to them). Since these matters can get complicated you should consult a tax professional who can help you weigh your options. Happy tax time.
The post When Should Married Couples File Taxes Separately? appeared first on Dyer News.
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