Tax Tips When Filing With a Spouse
When filing your taxes as a married couple, you have the choice to file your taxes on your own or jointly. Do you know what the best choice is for you? In most cases, it is best to file jointly, but there are some factors that you should consider before deciding on how to file your taxes. Keep these disadvantages of filing separately in mind to help you decide which option is right for you:
- Deductions – when you file separately, your standard deductions will drop significantly and may cause many itemized deductions that are reduced through income phase outs can be eliminated entirely.
- Tax rates – when you file your taxes separately, your tax rate will shift downward. In other words, this means that higher tax rates will kick in at your lower level of income.
- Credits – filing your taxes separately reduces, or can even eliminate potential tax credits that are subtracted directly from your tax bill. For example, you will not be able to take advantage of the Earned Income Tax Credit or educational credits. While the Child Tax Credit is still available, it will be significantly reduced when you file separately.
- Benefits – in most cases, more of your Social Security benefits are taxable when you file on your own. When you file jointly with your spouse, you have to combine benefits and incomes to figure out the taxable portion of your benefits, even if your spouse is not receiving any.
- Alternative Minimum Tax – when you file separately, your Alternative Minimum Tax exemption will be cut in half, which makes it even more likely that you will pay the Alternative Minimum Tax, which can reduce or eliminate many taxes.
Contact Phocus Companies in Phoenix, Arizona for all of your questions this tax season when considering if you should file your taxes jointly or separately.
