One of the more common strategies married couples consider when thinking of ways to reduce taxes is whether or not they should file their tax returns separately, rather than jointly. While this strategy may be a common consideration, it is not as common for this strategy to actually be implemented. Following are a few reasons why “together” is usually the best option for most married couples when filing their taxes.
First, taxpayers filing separately are subject to the higher tax brackets earlier than taxpayers filing their returns as single. For example, in 2014, a taxpayer filing as single can earn up to $186,350 before being subject to the 33% tax bracket. However, a married filing separately taxpayer can only earn up to $113,425 before being subject to this tax bracket.
Also, filing separately eliminates the flexibility of deductions that taxpayers would have if they were to file their returns jointly. With a joint filing, taxpayers can decide to use either itemized deductions or the standard deduction, based on which method offers the most benefit. Even though taxpayers filing separately are still able to choose which deduction they take, the method that one spouse uses also becomes the method the other spouse must use. This means that if one spouse uses itemized deductions, the other spouse must also use itemized deductions, even if the standard deduction would have been more beneficial. Additionally, filing separately eliminates the opportunity for taxpayers to take various other deductions and credits. These include adoption expenses, child and dependent-care costs, educational tax credits, and interest paid on student loans.
While filing jointly is often the best option for married couples, there are some cases in which filing separately can be more beneficial. As a result, it is important to keep organized records and send all necessary documents to your tax advisor so that a proper analysis of your situation can be made.
By: Ruben Becerra, Staff Accountant