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Marriage and Taxes 101: Deciding Whether to File Jointly or Separately

by
Evelyn Hsu
on
12/7/2015
Marriage and Taxes 101: Deciding Whether to File Jointly or Separately

Whether you got married on January 1st, December 31st, or at any date in between, the Internal Revenue Service considers you to have been married for the entire year. This means that if you got married last year, you have to make one of the first important tax decisions of your married life – whether to file your taxes as married filing jointly or married filing separately. If you are used to having paid taxes as a single person, the adjustment is likely to be eye opening, as there can be both advantages and disadvantages to your new tax status.

Filing jointly means that you are paying taxes on your combine income, and when both of you work and earn an income that can mean that you have a much higher tax liability. Some of the tax benefits that you enjoyed as a higher-income single person are no longer available to you once you're filing as married, and the results can be upsetting. They may include:

  • Finding your child care credit reduced
  • Finding your net investment income taxed where it previously hadn't been
  • Finding yourself in a higher tax bracket
  • Having a number of itemized deductions phased out as a result of higher combined income
  • Having income from Social Security subject to tax
  • Having to pay capital gains at a higher rate
  • Having your deductible IRA amount limited
  • Having your Earned Income Tax Credit reduced
  • Having your medical/miscellaneous itemized deductions no longer available or reduced
  • Losing the personal exemption deduction

Though some think that if they choose to file married but separate rather than jointly they will not be faced with these issues, in most cases that doesn't work. Those who write the tax codes anticipated that people might try to avoid taxes by adjusting their filing status in this way, and have included specific provisions to prevent people from gaming the system.

Though the shift to filing as married works against some, it works to others benefit. For couples where only one spouse earns an income, the married filing jointly tax status generally provides the advantage of a lower joint tax bracket, and there may also be an additional exemption available to those couples where one spouse does not work. Similarly, there are certain limitations that higher income individuals may have been subject to prior to marriage that fall away or are reduced by virtue of filing a married joint return.

Generally speaking, the tax laws have been written to dissuade couples from trying to get around income limitations by filing separately, and as a result those who do end up paying more in combined taxes. When filing separately a couple cannot elect to have one itemize and the other take the standard deduction: Each spouse has to choose the same option. Additionally, filing separately effectively eliminates the taxable threshold for Social Security income. Where a couple filing married jointly avoids taxes until half of their benefits and other income adds up to more than $32,000.

There are many things that need to be taken into account when deciding how to file a married return. Beyond the issue of how much a couple will end up paying in taxes, consideration must also be given to the fact that married taxpayers who file jointly are “jointly and severably liable” for their taxes, as well as for any interest or penalty that may be due. This does not change if a couple dissolves their marriage at a future date. However, couples who file married but separate are not responsible for each other's tax liability – they are only responsible for their own.

Understanding the ramifications of the filing status you choose can be a challenge. If you need help determining what will work best for you in this new phase in your life, contact a professional for guidance.

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Evelyn Hsu

Evelyn Hsu

Ivy Accounting, Tax & Advisory is a Certified Public Accountant (CPA) practice based in Miami, Florida. Evelyn Hsu is the principal in charge of the accounting and auditing practice and is CPA licensed in the state of Florida. She graduated from the University of Miami with a Master's degree in Accounting. Her company has provided a wide range of accounting and tax services to businesses and individuals for many years. She specializes in services to individuals, to small businesses and in representation before the Internal Revenue Service. Evelyn can assist you with all of your tax preparation needs.

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