Those married filing separately may wonder if they are complicating an already messy tax situation or if they are indeed saving themselves money and time. Tax planning can be tough for those who are married but have different employment situations, requiring tax help from a professional. However, these basic pros and cons to filing separately while married may be enough to help you determine if it's best for you to file jointly or separately this year.
Pros: Situations When Filing Separately Is The Smart Thing To Do
1. Health Issues/Low Income
If one of you has many health problems-and the resulting medical bills-and a low income, but the other partner is healthy and has a decent income, you may benefit from filing separately. If you file separately in this situation, the partner with the low income and high medical bills might hit that itemization threshold for deducting medical costs more quickly than if you had filed jointly.
2. Your Partner Is Not So Good At Doing Taxes
Or wants to claim deductions you are not so comfortable claiming. Or is really disorganized. If you suspect your partner's methods of filing taxes may result in an audit-or worse, a conviction of some sort-you will want to file separately to protect yourself.
3. The Union Is Questionable
If your marriage isn't going so well and you think the end may be in sight, you may want to file separately to simplify your finances if a divorce is on the horizon.
Cons: Times When Filing Separately Is A Bad Idea
1. You've Started A Family
If you've recently adopted a child, had a baby or are hoping to claim full deductions on dependents, you'll want to file jointly because the married filing separately laws will penalize you if you don't.
2. You Make A Lot Of Money
Believe it or not, both singles and married couples filing jointly can claim more than those who are married filing single before jumping up in the tax bracket. This is especially so for those who make a hefty salary.
3. You Live In A Community Property State
You may not be allowed to file separately in some of these states. Check out IRS Publication 555 for details.
In most cases, filing jointly is, fiscally, the wisest way to go for most married couples.
While we all need to pay our taxes, you shouldn't pay more than you actually owe. Understanding a few basic income tax tips can greatly lower your tax liability. You can claim a number of tax deductions in order to lower the actual amount of tax you pay. However, you should be aware of issues such as raises and the alternative minimum tax (AMT), which may alter your income tax analysis.
Nearly 75 percent of Americans receive a tax return each year, with each return averaging nearly $2,500. That's a nice windfall for most of us but that doesn't mean you should run out and spend it like it's burning a hole in your pocket.
Use our checklist as a guide to help you gather necessary forms and receipts for preparing your income tax return.