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To File Jointly or Not to File Jointly

Authored By: Community Focus FCU on 1/6/2022

Three stacks of coin with letters that spell TAX on top

To File Jointly or Not to File Jointly 

If you’re married, you have a choice when it comes to the filing status on your federal income tax return: you can file jointly with your spouse or separately. For the majority of married couples, there are more advantages to filing jointly.

Filing jointing usually means a couple can deduct two exemption amounts from their income. It also more easily qualifies them for multiple tax credits, like the:

  • Earned Income Tax Credit
  • American Opportunity and Lifetime Learning Education Tax Credits
  • Exclusion or credit for adoption expenses
  • Child and Dependent Care Tax Credit
  • Student loan interest deduction
  • Tuition and fees deduction
  • Elderly and disabled credit

If a couple files jointly, their income is combined, giving them a higher income threshold for some taxes and deductions. For many people, this allows them to earn a larger amount of income and possibly still qualify for certain tax breaks. Those who file together do need to list their deductions the same way, so if one spouse itemizes their deductions, the other spouse must itemize as well, even if their itemized worth is less than the standard deduction.

In certain situations, filing separately may help you save more on your tax return, and on your spouse’s. For example, the IRS only allows you to deduct medical costs that exceed a certain percentage of your adjusted gross income (AGI). So, if either of you have a large amount of out-of-pocket medical expenses to claim, it can be more difficult to claim the majority of the expenses if you and your spouse have a high combined AGI. You would be able to claim a higher percentage of out-of-pocket medical expenses if you filed separately.

Filing separately may help reduce the income used to determine student loan payments. If your federal student loan payments are based on your tax return income, then filing separately can result in a lower payment plan.

However, if you file separately, you are disqualified from several of the deductions and credits listed above. Not only that, but filing separately lowers the standard deduction that’s offered to joint filers—in the past, up to 50 percent lower—and the capital loss deduction limit. If you contributed to an IRA, are married, and file separately, you may be limited to a smaller IRA contribution deduction.

The best way to decide which filing status is more advantageous to your specific situation is to work with a tax professional. They will most likely calculate both outcomes to see which net refund is higher, or which balance due is lower. Or, you can use tax software that can give you similar guidance or allow you to calculate both scenarios.

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