File Tax Jointly or Separately: A Post Marriage Issue

Many a times married people get confused about filing tax as they can’t figure out whether they should file tax separately or jointly. According to experts, married couple should file their taxes jointly and the process is known as married filing jointly (MFJ). IRS prefers you to file tax jointly, if you’re legally married within the financial year. It helps IRS you simplify compliance and reporting issues. In some cases, married filing separately has few advantages. Most of the times those cases are related to large medical expenses or state taxes. If you go for MFS, there are some advantages.

If your spouse is living away from home or main home for a time span of more than six months, then you can file tax with dependant as head of household. If only one of you is filing tax with dependant there is an advantage. Suppose you’re filing tax with dependant then your spouse will be free from special debts such as outstanding student loans or child support. This way, tax return of only one spouse will gets affected. There is another condition where you get great advantages, if you file tax separately despite being married. You will get benefit on tax relief for dental and medical expenses only if your amount of expenses exceeds 7.5% of your adjusted gross income (AGI). Separation in filing taxes will provide advantage to one spouse who has lower AGI and high medical expenses on tax file. You can get claim for the dependant only once. In other words, if you’re filing separately, it doesn’t mean the couple can split the benefits of dependant in half or both get the same benefits.

Another advantage of filing separately is that you don’t have to take complete responsibility for the deductions and liabilities of your spouse. However, if you’re residing in community property states such as California, Idaho, Arizona, Nevada, new Mexico, Louisiana, Wisconsin, Texas and Washington then property and income of you and your spouse will not be considered as separate even if you’re filing tax separately. The property considered as community-owned by community property states and while filing tax, you’d need to report all your income as well as community property income. It is also mandatory to report unearned income that arises from community state property. Moreover, the rules for filing tax separately also differ from state to state. For instance, if you’re residing in California, you might get “innocent spousal relief” however, you’ll not at all get relief for injured spouse.

There are some disadvantages as well, if you file tax separately. First one is that you’ll never get tax credits related to child, education, adoption and dependant care. If you’re living together but filing tax separately, you’d need to face more restrictions. If you’ve a rental property and faced passive loss, you’ll not get any claim. Few retirement accounts also get a hit. However, you can claim credits for disabled or elders. Before filing separately, calculate and compare the tax amount or refunds due with both methods separately as well as jointly. And make your choice!