Filing jointly vs. Separately Can Impact Tax Deductions and Credits You Receive
I recently had a chance to speak with Leigh Mutert, a CPA and community manager for H&R Block, and I was hoping to get some expert tax advice to share for this coming tax season. One of the biggest changes most people encounter when it comes to taxes is getting married. Being a single filer is straightforward, but with marriage comes a number of new deductions, credits, and even tax filing strategies that can minimize your tax burden. Below her Leigh’s advice.
If you’ve recently gotten married or plan to marry soon, your financial, legal and tax situations could be affected. Here are some important elements to consider:
Your status on the last day of the year determines your filing status for the entire year. If you’re married, you and your spouse can choose to file a joint return or file separate returns. Unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns) to determine which filing status is best for you.
Most taxpayers claim the standard deduction a fixed amount that reduces the income on which you are taxed. Here are the standard deduction amounts according to filing status.
- Single or Married Filing Separately: $5,700
- Married Filing Jointly or Qualifying Widow(er): $11,400
Married Filing Jointly
You can choose Married Filing Jointly as your filing status if you’re married and both you and your spouse agree to file a joint return. With a joint return:
- You report your combined income and deduct your combined allowable expenses.
- Your tax may be lower than your combined tax for the other filing statuses.
- You may qualify for tax benefits that would not apply if you filed separately.
Married Filing Separately
This filing status may benefit you if you want to be responsible only for your tax or if it results in less combined tax than filing a joint return. With separate returns:
- You generally report only your own income, exemptions, credits and deductions on your individual return.
- You can claim an exemption for your spouse if your spouse had no gross income and was not the dependent of another person.
You may Become Ineligible for Tax Credits and Deductions You Received in the Past
Because of your newly combined income, you may lose benefits (such as the Earned Income Credit and the Child Tax Credit), you were able to claim before you were married, especially if you filed as Head of Household before the marriage.
Compare Taxes When Filing Separately Versus Jointly
You will generally pay more combined tax on separate returns than you would on a joint return because you are not able to claim as many credits and deductions.
Take your latest pay stubs along with last-year’s tax returns to a tax professional like H&R Block and have a pro forma joint return prepared. Be sure to let the tax pro know about any items that will be different. For example, if neither of you owned a home and you are buying one, the tax pro will take the interest and taxes you expect to pay into account. If the pro forma joint return results in a balance due and this is unsatisfactory to you, you can increase your withholding by filing new Forms W-4 or by making estimated tax payments to cover the expected balance due.
H&R Block tax prep software guarantees accuracy and the maximum refund. Plus they will look at your tax returns from the past three years to see if there is tax refund money you missed.
Things to do After You’re Married
Your social security number stays the same regardless of your marital or filing status. If you do change your name, you should apply for a social security card in your new name. This process can only be done through your local Social Security office. If your name and number don’t match, you may see a delay in the processing of your tax return and any refunds that are due to you.
Inform the IRS if You Have a New Address
If you move to a new address after you’re married, you’ll want to inform the IRS. It’s not required, but if the post office doesn’t correctly file your change of address form, it can result in delays in refunds and any correspondence with the IRS. To change your address, file Form 8822.
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.