When you tied the knot with your spouse, you may not have given much thought to the tax implications. The majority of married couples file taxes jointly, but it’s also possible to file individually, just as you did before you said your vows.
Is it better to file jointly or separately? The answer largely depends on your financial situation. Discover whether filing jointly or separately makes sense for you below.
Married couples typically file their taxes jointly, and there’s a host of benefits they enjoy by doing so. One of the largest benefits is that you can claim a bigger Standard Deduction if you file jointly than you would by filing separately.
For 2024, couples filing jointly can nab a Standard Deduction of $29,200. Comparatively, if you file separately, you can only claim a Standard Deduction worth $14,600.
The Standard Deduction isn’t the only thing you’ll score by filing jointly. Doing so makes it easier to qualify for credits and deductions such as:
Married filing jointly also makes sense if one spouse has a much higher income than the other. In this case, filing separately can push one of you into a higher tax bracket.
Is it better to file jointly or separately? For the majority of married people, filing separately isn’t a wise choice. Filing separately means you’ll automatically lose out on certain tax credits, and separate filers usually end up with a smaller deduction for their IRA contributions. Additionally, the IRS imposes a capital loss deduction of $1,500 for single filers vs. a $3,000 deduction for joint filers.
If you have student loan interest, filing separately may be a big mistake. Only joint filers can take advantage of the student loan interest deduction, while single filers are out of luck.
There are some cases in which filing separately is the smartest choice. For example, if you have student loan payments that are calculated based on the income shown on your tax return, filing separately might let you keep those payments more manageable. However, you’ll lose out on the student loan interest deduction, so it’s a tradeoff.
If you or your spouse has hefty out-of-pocket medical bills, it may make sense to file separately. Doing so can help you meet the IRS’s threshold to deduct medical costs. This threshold is based on your Adjusted Gross Income (AGI). By filing separately, your AGI will be lower.
When is it better to file jointly or separately? If you’re preparing for divorce, it’s wise to file separately. This can minimize your tax liability for your soon-to-be ex’s taxes after divorce.
The only way to determine which filing status is right for you is to prepare your taxes separately and jointly and compare the numbers. Once you’ve done that, pick the option that gives you the biggest refund or the smallest balance due. If your tax situation is complicated and you’re not sure which status to use for the biggest tax benefits, talk to a tax attorney before you file.
Still wondering, “Is it better to file jointly or separately?” Not sure which filing status makes sense for you and your spouse? Reach out to our tax consultants at Levy & Associates. Call us at 313-447-1704 or contact us online to schedule a consultation today.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
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