Need tax help with your marriage filing status?
Taxpayers who are married on the last day of the tax year must file either:
- One tax return with “Married filing jointly” (MFJ) filing status or
- Two tax returns with “Married filing separately” (MFS) filing status
Tax filing as “Single” is generally NOT permitted for a married person. For tax purposes, you are considered married for the whole year if you are legally married as of December 31 (calendar tax year). For tax year 2013 and going forward, same-sex spouses generally must file as either married tax filing separately or married filing jointly. You are considered married when your marriage is legally recognized by any US state, or by any foreign country.
There are exceptions to the general rule that a married person must file as either MFJ or MFS. It may be possible, when a couple lives in separate homes and when other special circumstances are met, for a spouse to file as “Head of Household”. Additionally, when you are legally separated, but are still legally married, this state may also apply. Your tax preparer will help you determine if an exception applies.
Main advantage to filing “Married Filing Jointly” – Reduced combined taxes (most of the time)
For most married taxpayers, you likely would pay less combined tax by filing jointly as compared to filing MFS. The tax savings could be as high as several thousand dollars for a number of reasons:
- Lower tax rates for MFJ as compared to MFS
- When filing jointly, you can freely elect to take the standard deduction or to itemize deductions depending on which would result in lower taxes.
- You may be eligible to take certain tax credits when filing as MFJ that are disallowed when filing MFS. Examples include: Child and Dependent Care, Earned Income Credit, College Education Credits/deduction and US Savings Bond interest used for higher education.
- If the married couple lives together in the same home, when filing MFS, 85% of any social security benefits are taxable income (the maximum). When filing as MFJ the taxable portion of social security benefits may be much lower.
- Some credits may be reduced or eliminated due to lowered income phase-outs when filing as MFS. Examples of this type are the Child Tax Credit and the Retirement Savings Credit.
- Capital Loss deduction limit is $3,000 for MFJ, half that, $1,500, for each MFS return.
- Capital gain exclusion for a sale of your main home is $500,000 for MFJ, half that, $250,000, for each MFS return.
Main advantage to filing “Married Filing Separately” – not liable for spouse’s tax balances
When you file jointly each spouse is “jointly and severally” liable for the combined tax due. When you file separately, you are liable only for your own income tax, not your spouse’s income tax.
Disadvantage to second filer when filing MFS
When filing separately, the spouse that files his/her return first gets to elect to take a standard deduction or to itemize, whichever results in lower tax. However, the first filer has now dictated that the second tardy spouse must follow suit. If the first spouse to file itemizes then the other spouse must also itemize. If the first takes the standard deduction, the second must do that too. The second filer does not have a choice and, as a result, may pay more tax then he/she would otherwise pay.
Have your tax preparer compare filing MFJ and MFS
There are a few instances when tax filing separately would result in less combined tax as compared to filing MFJ. There is no substitute for running the numbers both ways. The effect on the state return should be analyzed as well and factored in. A competent tax preparer will be able to determine which filing status has the greater tax benefit overall for a given tax year.
Contact Community Tax today with questions about your marriage filing status. (800) 444-0622