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Managing your money as separate individuals doesn’t mean you have to file taxes that way. In most cases, you’ll end up with more money in your pocket with a joint return. Here’s why.
You may score a lower tax rate.
In the lower tax brackets, income limits for married couples are double the limits for a single filer. For example, if you file separately and you make $40,000 a year while your spouse makes $32,000, you would end up in the 25% tax bracket and your spouse would be in the 15% tax bracket. By filing together, you both pay the 15% tax rate.
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Keep in mind that couples with similar incomes in higher tax brackets could end up paying higher tax rates with a joint return, depending on the deductions and credits you qualify for.
You may qualify for more tax benefits.
A joint return gives you the advantage of several major tax benefits. A qualified tax advisor can give you your full tax-benefits picture, but here are just a few you could miss out on by filing separately:
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- Child and dependent care credit
- Earned income credit
- Adoption tax credit
- American opportunity credit
- Lifetime learning credit
- Deduction for student loan interest
- Tuition and fees deduction
- Credit for the elderly or the disabled
The one time it’s almost always cheaper to file separately is if your spouse skips out on paying taxes altogether. In that case, do the responsible thing and file separately so your tax obligation is covered. Of course, if you and your spouse don’t see eye-to-eye on something as basic as paying taxes, you’ve got bigger financial fish to fry. That’s actually a great example of why Dave’s a big proponent of married couples combining finances. It creates unity so you’re not constantly pulling the rug out from under each other.
As with any tax decision, there’s no one-size-fits-all answer. That’s why it’s always a good idea to enlist the help of a pro. A qualified tax advisor can walk you through your options so you can make the decision that’s right for you and your family. If you’re looking for advice you can trust, we can put you in touch with a tax expert Dave recommends in your area today.