Married couples have the option to file jointly or separately on their federal income tax returns.
The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it's best for married couples to file jointly, but there may be a few instances when it's better to submit separate returns.
Advantages of filing jointly
There are many advantages to filing a joint tax return with your spouse. The IRS gives joint filers one of the largest standard deductions each year, allowing them to deduct a significant amount of their income immediately.
Couples who file together can usually deduct two exemption amounts from their income and they might more easily qualify for multiple tax credits such as the:
Earned Income Tax Credit
American Opportunity and Lifetime Learning Education Tax Credits
Exclusion or credit for adoption expenses
Child and Dependent Care Tax Credit
Joint filers mostly receive higher income thresholds for certain taxes and deductions – this means they can earn a larger amount of income and potentially qualify for certain tax breaks.
Consequences of filing your tax returns separately
On the other hand, couples who file separately receive few tax considerations. Separate tax returns may give you a higher tax with a higher tax rate. The standard deduction for separate filers is far lower than that offered to joint filers.
In 2016, married filing separately taxpayers only receive a standard deduction of $6,300 compared to the $12,600 offered to those who filed jointly.
If you file a separate return from your spouse, you are automatically disqualified from several of the tax deductions and credits mentioned earlier.
In addition, separate filers are usually limited to a smaller IRA contribution deduction.
They also cannot take the deduction for student loan interest, or the tuition and fees deduction.
The capital loss deduction limit is $1,500 when filing separately, instead of $3,000 on a joint return.
When you might file separately
In rare situations, filing separately may help you save on your tax return.
For example, if you or your spouse has a large amount of out-of-pocket medical expenses to claim and since the IRS only allows you to deduct the amount of these costs that exceeds 10% of your adjusted gross income (AGI), it can be difficult to claim most of your expenses if you and your spouse have a high AGI.
Filing separate returns in such a situation may be beneficial if it allows you to claim more of your available medical deductions by applying the 10% threshold to only one of your incomes.
There is a temporary exemption from Jan. 1, 2013 to Dec. 31, 2016 for individuals age 65 and older and their spouses. If you or your spouse are 65 years or older or turned 65 during the tax year you are allowed to deduct unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income. The threshold remains at 7.5% of AGI for those taxpayers until Dec. 31, 2016.
Deciding which status to use
The best way to find out if you should file jointly or separately with your spouse is to prepare the tax return both ways. Double check your calculations and then look at the net refund or balance due from each method. If you use TurboTax to prepare your return, we’ll do the calculation for you, and recommend the filing status that gives you the biggest tax savings.
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