Dual income families face a unique set of challenges when it comes to filing income taxes. There are a number of factors couples should consider before deciding whether to file income taxes jointly or separately. Generally, no two situations are identical, and there are exceptions to every rule. However, the following checklist will give you a head start in your decision-making. If it all seems overwhelming, give us a call and we’ll walk through it with you step by step.
You might want to file jointly if…
- Averaging your two incomes brings you down to a lower tax bracket. For example, if one spouse earned $15,000 and another earned $75,000, the “average” of the two is $45,000. This is obviously a lower bracket than the $75,000 income.
- You’re only filing separately because you think it will eliminate the “marriage penalty”. It won’t.
- You are eligible to claim any of the following credits:
- Child and Dependent Care Credit — Did you pay expenses for a dependent to be cared for while you worked or actively looked for work?
- Adoption Expense Credit — Did you pay out-of-pocket expenses to adopt a child?
- American Opportunity Tax Credit — Did you take classes for credit toward an undergraduate degree?
- Lifetime Learning Credit — Are you a student at an eligible educational institution?
- You want to avoid the limitation on itemized deductions and the personal exemption phaseout.
- You receive social security benefits.
You might want to file separately if…
- You don’t want to be liable for your spouse’s tax in the context of your combined incomes.
- One spouse has medical expenses, casualty losses, or miscellaneous itemized deductions that could be reduced by a percentage of adjusted growth income.
But keep in mind…
All of these conditions are technical in and of themselves. You can research them independently at the IRS.gov website, or give us a call and we’ll do our best to explain them in layman’s terms. Even if you understand the nuances of each caveat, there may be specific circumstances that make your particular case unique. As you likely realized reading through the lists, there is no hard and fast “Yes” or “No” to whether or not couples should file income taxes jointly or separately. More often than not, the answer falls under the umbrella of “It depends.”
The only way to know for sure which filing option is best for you is to calculate the taxes and deductions for each option and compare the results. What may seem like a lot of extra work could potentially save you thousands of dollars in taxes you don’t have to pay. If you could pay less, why wouldn’t you? Let us help you navigate the labyrinth of tax law to make sure you pay what you owe and nothing more.