You must choose a tax filing status when you file your tax return. This status is used to determine your correct tax, eligibility for certain tax breaks, tax rates and standard deduction.
These are the 5 tax filing statuses:
- Single
- Married filing jointly
- Head of household
- Qualifying surviving spouse
- Married filing separately
What Your Tax Filing Status Mean
Whether you should file joint or separate tax returns if you’re married depends on your individual situation. Although, you should choose the filing status that results in the lowest tax. However, if you file jointly, you’re ‘jointly and severally’ responsible for the tax on your combined income.
And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. That means the IRS can hold either of you responsible for collecting the full amount.
When the spouses have different income levels, filing jointly offers the better tax savings, in most cases. But filing separately doesn’t mean you go back to using the ‘single’ rates that applied before you were married. Instead, each spouse must use ‘married filing separately’ rates. Unfortunately, they are less favorable than the single rates.
Tax Breaks Only For Joint Return
You should be aware that some tax breaks are only available on a joint return. These tax credits include the following:
- Child and dependent care
- Adoption expense
- American Opportunity Tax
- Lifetime Learning
Moreover, if you file separately, you cannot take the credit for the elderly or disabled. In order to take advantage of this credit would be to live apart for the entire year.
Social Security Benefits
When married couples file separately, social security benefits may be taxed more. If your provisional income does not exceed a ‘base amount’, your benefits are tax-free. The base amount is $32,000 on a joint return. Zero on separate returns (or $25,000 if the spouses didn’t live together for the whole year).
Circumstances Matter
The federal tax filing status you choose may affect your state or local income tax bill. Given this point, the total tax impact should be compared. There may not be a simple answer as to whether a couple should file jointly or separately. Various factors must be examined.
We can help you make the most advantageous choice. Contact us to prepare your return or if you have any questions.
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