Now that you're married, should you file taxes separately or Jointly?
Newlyweds have a lot to think about when it comes to sharing money and managing finances. Does it make sense to have joint bank accounts, separate accounts, or both? How will you split bills and manage your combined expenses? And as your first tax season as a married couple comes around, should you file separately or jointly?
Thankfully, the tax question is a fairly simple one for most married couples because there are actually very few situations where it makes sense to file separately. You’ll usually pay more in taxes when you file separately, which is the deciding factor for most people. The reason you should file jointly is because you can take advantage of as many available tax credits as possible. Some of the more common credits for married couples include:
- The earned income tax credit
- The student loan interest deduction
- The tuition and fees deduction
- Traditional IRA deductions and Roth IRA contributions
- The child and dependent care tax credit
- The adoption tax credit
Claiming these deductions can add up to a lot of money saved. There are some scenarios where it may make more sense to file separately. One situation is if you have a specific reason to keep your tax liabilities independent. When you file jointly, you and your spouse are both responsible for all the information you report, so be certain that all details are completely accurate for both of you.
Another reason is if one of you has a lot of itemized deductions that don’t apply to the other person. For example, if you have out-of-pocket medical expenses that exceed 10% of your adjusted gross income in 2019, you can deduct those expenses (the floor is 7.5% in 2018). If you file jointly and have effectively doubled your income, it will be a lot harder to reach that income floor and write off those expenses. Something else to keep in mind is if you choose to file separately because you or your spouse will owe money on your tax return, the IRS will not apply your refund to your spouse’s balance. That could be a way for you to get some money back.
As you become familiar with the different processes of tax filing when you’re married, be aware of how your tax situation could change in the future. Changes in your combined income, qualifications for additional tax credits, or an increase in debt will influence your tax filing. If you were ever to separate, choosing to file taxes separately will avoid any liability relating to your soon-to-be-ex’s finances.
Remember, there isn’t one right answer for every married couple when it comes to your taxes. How you choose to file together depends on your personal circumstances and many variables surrounding income, debt, expenses, and liabilities. The best course of action is usually to file jointly as a married couple and claim as many credits as you can, but if you think you could save money by filing separately, consult with a tax professional or use a tax software service.
“You’ll usually pay more in taxes when you file separately, which is the deciding factor for most people.”