A lot can happen in a year. People get married, divorced, and have kids all the time. There are tax implications for these life events. Taxes must be addressed every year and this year is no different. It is essential to ask yourself certain questions before writing a check to Uncle Sam. If this is your first tax filing since getting married, you have to consider if you should file joint or separate tax returns. Here are a few considerations.
Is your income much higher than your spouses?
If you or your spouse make a significant amount more than the other, you should consider filing jointly because it could put you both in a lower tax bracket. Tax brackets for couples filing jointly are different than that of individuals.
If you and your spouse earn approximately the same income, it is probably a better idea to file separately.
Credits and deductions
It is a well-known fact that being married entitles you to certain tax credits and deductions. For example, the Standard Deduction doubles from $12,000 to $24,000 for married couples. Other examples of deductions and credits include:
- Child and dependent care credit;
- Education credit;
- Credit for adoption expenses;
It pays to be married!
Two returns cost more than one
It is almost always cheaper to file a tax return jointly than it is to file two separate returns. This may not be a big deal and maybe you shouldn’t make your decision based on this information, but it is not nothing and should be considered.
Do you or your spouse owe taxes for a previous bill?
If you or your spouse owe state or federal taxes from unpaid personal property tax, a previous year’s tax return, or something else, you may want to file separately. Filing separately can protect you or your spouse from the other’s tax debt. The federal and state government have a nifty process called a “tax refund offset”. They will take your refund and subtract any outstanding tax debt.
Children and child support
If you or your spouse have children from a previous relationship and owe backed child support for whatever reason, the IRS is perfectly within their rights to offset that debt with your tax return. This would be a good reason to file separately.
Additionally, if you, your spouse, or both of you have assets intended for your respective children, you may want to file separately. Assets can be mixed when filing a joint return, and this could complicate things down the road.
Tons of people have medical bills. They can have a huge impact on your financial situation. If you or your spouse have spent over 10% of your annual income on medical bills, you can deduct the expenses. However, you can only do this if you file as an individual.
If you are unsure of how you should file or you are being harassed by the IRS, you need the guidance of a licensed, experienced attorney. Dsouza and Strachan Legal Group has the knowledge and experience to get you back on track. Contact Dsouza and Strachan today for a free consultation.