Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

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Pioneer
Posts: 2
Registered: ‎01-11-2017
Accepted Solution

should we file separately?

My husband and I got married last January, so this will be our first year doing taxes as a married couple. However, I'm wondering if we should file separately and was hoping to get some advice from from others in similar situtions.

 

He owns his own business, while I work a salaried job. As a business owner, many expenses come out of the business (and obviously loss/gain there applies to his taxes), and he's also able to write off a number of items that I am not (mileage, business dinners, etc. - all the self employment stuff). He does a fantastic job keeping up with his itemized deducations, and when we look at the percentage of total income he pays in taxes, it's significantly lower than the percentage of my total income we pay in taxes, because his AGI ends up being low due to the write offs.

 

I'm concerned that if we file jointly and add our incomes together, we'll still be able to itemize his deductions, but we'll lose my standard deducation (and I can't itemize or write off much of anything). Though his AGI will be low, combined with mine, it will put us in a higher tax bracket, where we're likely taxed at a 20% rate, which is what I'm used to paying, but is higher than what he pays.

 

However, I am not a tax expert by ANY means, and I'm not sure if that logic is even correct or what tax breaks are out there for married couples that might offest the lack of standard deduction. Any thoughts??

Associate (Neighbor)
Posts: 443
Registered: ‎01-31-2014

Re: should we file separately?

Kristennicole,

 

Congrats on you marriage, and your first year anniversary!  As far as filing separately vs. jointly, it almost never

works out to an advantage to file separately.  Filing jointly nearly always works out better for a couple. However,

if you go into an HRB office with all your info (both parties) and set down with a tax preparer they can prepare a

return AND show you the differences both ways!  The software the preparers use in the office makes that fairly

simple and can really be an "eye opener" to the two of you.

 

I hope this helps, and good luck.

 

 

Tax Pro
Posts: 5,208
Registered: ‎02-23-2016

Re: should we file separately?

Hi kristennicole86,

 

Welcome to the community and a happy anniversary to you.

 

So the first thing that sticks out in my mind here is the question about your standard deduction.  When you file jointly your standard deduction is actually doubled, it isn't lost.  Instead of $6,300 each you get $12,600 on a joint tax return.  You also get $8,100 in exemptions assuming that you have no dependents at present.

 

Also, if your husband's net income is significantly lower than yours then you might be in a lower tax bracket than you think.  Not only do you get the $12,600 standard deduction but you also get a lower tax rate for the federal income tax when you file jointly.

 

Now let's look at the itemized deductions.  Your husband will still be able to deduct his expenses from his business on his Schedule C whether or not you take the standard deduction so that won't change your deduction.  However, if personal itemized deductions such as mortageg interest and insurance, which are deductible on Schedule A, exceed your joint standard deduction amount of $12,600 then you will benefit more from itemizing everything that you can on Schdule A.

 

If you file separately on the other hand, and your husband itemizes on Schedule A then you have to do the same even if you deductions are equal to zero.  Filing separately offers a lot more restrictions than benefits.  One of the rare instances when filing separately would likely be more beneficial is if both of you had high enough incomes that you were in a very high tax bracket and you couldn't claim any of the major credits.

 

I recommend that you sit down with a tax professional and prepare your tax return both ways so that you can see the differences laid out in front of you.  Also, you can see the difference between the two filing options if you use a tax calculator to compute the outcome of your tax return in each of the two ways.

 

I hope I've been able to help you out.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Pioneer
Posts: 2
Registered: ‎01-11-2017

Re: should we file separately?

Thank you both so much for the insight! This definitely helps clarify some things; that does make sense that if his itemized deductions are more than our joint standard deduction, it really won't matter if I itemize nothing. His taxes end up only being about 10% of his total income by the time he makes the deductions, so it seemed that adding ours togehter could throw that off -- but with the extra tax benefits for the marriage, it might offset that. I think comparing the two through a professional would be a great way to do the math and see - thank you both!

Tax Pro
Posts: 5,208
Registered: ‎02-23-2016

Re: should we file separately?

You're quite welcome.