During tax season, many married couples have to decide between filing jointly or filing separately. “Married” in the tax world applies to people who are married and living together, as well as people who are separated and not living together. Also, if your spouse passes away and you do not get remarried in that same year, you can file jointly for one last time. If you’re considering filing jointly, know that there are many benefits of doing so.
1. Lower tax rates
One of the main benefits of filing taxes jointly is the potential to receive a lower tax rate. When filing taxes jointly, couples are able to combine their income, deductions, and credits, which can help lower the amount of taxes owed. Depending on how much each spouse earns and how much they owe, filing jointly can result in a lower tax rate than if each spouse filed separately. Although, if both spouses earn similar income, there may not be a huge difference in tax rates.
2. Credit and deduction opportunities
When filing jointly, there are more tax benefits available that wouldn’t be if you were to file separately. Some examples of these include:
Earned Income Tax Credit (EITC)
This credit can provide a much-needed boost to those with lower incomes, allowing them to keep more of their hard-earned money. The EITC helps reduce the amount of taxes owed after deductions and credits are applied. Furthermore, since married couples filing jointly are allotted a larger standard deduction than those filing separately, they may be eligible for a higher credit. It is important to note that if a couple has children and earns an income below a certain level, they may benefit even more from the EITC.
Child and Dependent Care Credit (child must live with you for more than half the year)
The Child and Dependent Care Credit is available to couples who pay for the care of a dependent under 13 years old, a disabled spouse, or another dependent in order for the couple to work or look for work. The amount of the credit depends on the amount of qualifying expenses and the couple’s income, but can be as much as 35% of those expenses. Filing taxes jointly can be a great way for couples to take advantage of this credit and reduce their taxable income.
Lifetime Learning Credit
Another credit available to married couples who have filed jointly is the Lifetime Learning Credit. This credit covers up to $2,000 of qualified educational expenses for eligible students, making it easier for couples to afford the cost of higher education for themselves or their children. The Lifetime Learning Credit is an invaluable resource for those looking to obtain an education, and filing jointly can make it possible.
For couples filing their taxes jointly, another great opportunity is the adoption credit. The amount of this credit varies, but it can be as much as $6,890. This credit is designed to help offset the costs of adopting a child, such as travel expenses, legal fees, and other adoption-related costs. The adoption credit is available for the adoption of both domestic and foreign-born children. Couples should consult a tax professional for more information on eligibility requirements and claiming the credit on their taxes.
Standard deduction of $25,900
The standard deduction for joint filers is double that of those filing separately ($12,950), meaning joint filers can reduce their taxable income by twice the amount. This is beneficial for couples who may have higher incomes and fall into higher tax brackets, as the larger deduction can significantly reduce their overall tax burden. If you need more information regarding credits and deductions, please visit irs.gov.
3. Retirement savings
Another major benefit of filing jointly is the ability to make IRA contributions. When filing joint taxes, both spouses are eligible to contribute to an IRA, which can help build retirement savings and potentially lower your taxable income. If one of the spouses does not have income for the year, the other can still make a contribution to their own IRA account. Additionally, the limit to contribute to an IRA is significantly higher compared to those who are married and filing separately.
4. Less stress
As you can see, filing taxes jointly with a spouse can provide a number of advantages. One last benefit is the simplicity it can offer — filing taxes jointly simplifies the process by allowing couples to complete one tax return instead of two separate returns. This often leads to fewer errors, less paperwork and less confusion.
What if I am married and still want to file separately?
Filing taxes jointly is generally seen as the best option for couples, but there are some circumstances where married filing separately may be beneficial. Married filing separately can be advantageous if one spouse has high medical costs, a large capital gain, or a significant deduction. Filing separately can help protect couples from being held responsible for each other’s tax debt or mistakes, especially if one spouse is known to not do well with paying. Also, filing separately is a great option for couples who are planning to divorce soon because it helps avoid post-divorce complications. Some couples even decide to file on their own because they prefer to keep all of their finances separate. If you are considering filing separately, there is nothing wrong with it, but it is important to consult with a tax professional to determine the best option for you and your spouse.