When you are married, you must file your income taxes either jointly or separately. For most married couples, it is best to file a joint return. However, each filing option has its pros and cons. Before you file your tax return, make sure you understand the implications of your filing status.
Why Should I File a Joint Tax Return?
Before 2001, more married couples experienced a “marriage penalty” when they filed their income taxes. A marriage penalty occurs when a couple pays more in income taxes than they would have as single people. However, changes to federal laws have made marriage penalties less common.
In fact, some married couples experience a “marriage bonus” when they file jointly. Married couples can file jointly, even if one spouse is not working. If one spouse has a significantly higher income than the other, a joint tax return may push the couple into a lower tax bracket.
Kate is a psychiatrist, and earns $200,000 in 2016. Her husband is a stay-at-home parent. If Kate were single, she would be in the 33% tax bracket. If she files jointly, they are in the 28% bracket.
Additionally, some tax deductions and credits are unavailable if couples file separate tax returns. These include the:
- Earned Income Credit,
- American Opportunity Credit,
- Lifetime Learning Credit,
- Education Credits,
- Child and Dependent Care Credit, and
- The exclusion/credit for adoption expenses.
These tax credits and deductions may significantly reduce the amount of income tax you owe.
For these reasons, many couples benefit from a joint return. Additionally, it may take less time to complete a joint return and you may spend less on tax preparation fees (since you only need to submit one Form 1040).
How Does a Couple File a Joint Tax Return?
The starting point for any tax return is typically IRS Form 1040. Regardless of whether you are filing jointly or separately, you need this form. You will also need documentation of you and your spouse’s:
- Income, such as W-2 and 1099 forms; and
- Exemptions, credits and deductions, such as a Form 1098 for the mortgage interest deduction.
Before you file your taxes, create a filing system for income tax documents. Otherwise, it’s easy to lose charitable donation receipts and other documents.
Both you and your spouse must sign your joint tax return. Your signatures certify the accuracy of your filing—and make you equally responsible for any taxes owed. The IRS will not accept a joint tax return, and thus will not issue a refund, unless both spouses sign the return.
When Should I Not File a Joint Tax Return?
For most married couples, a joint return is their best option. However, there are some circumstances when separate returns are advantageous.
One Spouse Has Significant Medical Bills.
The IRS sets financial thresholds before you can deduct medical expenses. Medical expenses may be deducted if they exceed 10% of your adjusted gross income. If you and your spouse are both high earners, it may be difficult to reach this 10% threshold together.
- John and Ana are married. In 2016, John’s adjusted gross income is $60,000. Ana’s adjusted gross income is $40,000. Unfortunately, Ana undergoes back surgery, which results in $5,000 in out-of-pocket medical bills.
- If Ana files separately, she can deduct her medical expenses. (10% of $40,000 = a $4,000 threshold.) However, if they file jointly, her medical bills do not reach the 10% threshold. (10% of $100,000 = a $10,000 threshold.)
Similarly, unreimbursed employee expenses (such as business travel expenses and union dues) have a 2% adjusted gross income threshold.
You Have Concerns About Your Spouse’s Tax Return.
Again, both spouses must sign a joint tax return. Your signatures make you and your spouse equally responsible for all tax payments and penalties. If you are concerned about the legality of your spouse’s tax filing, consider filing a separate return. Since you do not sign your spouse’s separate return, you are not liable for any payments or penalties.
Do I Need to Speak with a Tax Lawyer?
Federal income tax law can be difficult to understand—especially if you are married. An income tax lawyer will evaluate your financial situation and can help you maximize your tax credits, deductions, and exemptions. A tax lawyer may also help you avoid expensive mistakes and fines.