Figuring out your taxes when single can be pretty daunting. However, getting married adds a whole other layer of complexity when it comes to the way you handle your taxes. In general, married couples have the option of filing their federal income taxes jointly or separately. The IRS typically encourages married couples to file jointly through tax breaks and other financial incentives.
That said, there are many instances where filing your taxes separately might actually be the better option. So, if you’re wondering whether you and your spouse should file jointly or separately, here are some things to consider.
Why File Your Taxes Jointly When Married?
As previously highlighted, choosing to file your taxes jointly as a couple comes with a number of advantages, notably, enjoying large tax deductions every year. Some of the reasons to consider filing taxes jointly include:
You Get to Enjoy Lower Tax Rates
Filing taxes jointly when married allows you to capitalize on lower tax rates, and in many cases, you’ll need to file your taxes jointly to enjoy certain tax benefits. Before you decide whether it’s more prudent to file your taxes jointly or separately, you need to consider your income, your tax rate, and the kind of tax deductions and credits you might be eligible for. Some of the credits you stand to enjoy by filing jointly with your partner include earned income tax credit, Child and Dependent Care Tax Credit, American Opportunity Credit, and Adoption Credit.
It’s Less Complicated Overall
Jointly filing taxes with your spouse is overall far simpler and hassle-free compared to filing separately. For instance, when filing your taxes separately, only one of you can list your children as dependents, which is something you’ll need to agree on between yourselves. Likewise, you’ll need to decide whether to itemize or take the standard deduction. As you can imagine, reaching a consensus with your partner on these issues may not always be easy if you each have different preferences, which is something you don’t have to worry about when filing jointly.
Reasons to File Your Taxes Separately
While jointly filing your taxes certainly comes with its fair share of benefits, there are certain instances where married filing separately makes more sense. As a general rule, you should always opt for filing separately if you stand to save more money than you would doing so jointly. Here are some of the reasons why you might want to file your taxes separately when married.
Your Spouse Isn’t Meeting their Tax Obligations
If your spouse is failing to honor their tax obligations, it’s only a matter of time before this catches up to them and you don’t want to be in the line of fire when this happens. In this instance, filing your taxes separately is advised as it buffers you against any financial or legal problems that might arise out of your spouse’s poor decisions or inaction.
You Suspect that Your Spouse Isn’t Being Honest in Their Reporting of Income and Deductions
Filing taxes jointly requires total transparency between you and your spouse since you’re equally held liable for the accuracy of your tax returns or lack thereof. Consequently, if your spouse intentionally falsifies important tax data such as income and deductions, you can potentially get in trouble with the IRS for the same. So if you’re unsure whether your spouse is being truthful in their reporting, it’s best to bring this up with them to find a way forward and opt for married filing separately if the issue isn’t resolved.
Bottom line
While marriage comes with its fair share of challenges, discussing how to go about taxes with your spouse can prevent serious problems further down the line. Regardless of whether you prefer jointly filing your taxes or are more comfortable with a married filing separately arrangement, have a candid conversation with your spouse as early as possible to ensure you’re both on the same page.
If you need expert advice on how to handle taxes when married, Gurian CPA Firm is happy to help you out. Contact us today to book a consultation with one of our professionals and let us work out a suitable solution for you.
