Quick Guide to Joint vs. Separate Tax Returns

They say winged cupid is painted blind.  While that may be true when it comes to love, it certainly does not pertain to the IRS!

In the spirit of true love, Valentine’s Day and tax season, Krozel Capital is answering some questions you may have on filing your taxes jointly versus filing separately.

Hopefully we can help steer you and your loved one into making the best choice financially for you! 

1.)   How long do I have to be married to file jointly?

So long as you have said your vows by the time the clock strikes midnight on New Year’s Eve, you are considered married for the full year and can file jointly.

2.)   Is there a benefit to filing jointly vs. separately? 

Yes!  Married filing separately receive a standard deduction of  $12,000 vs. $24,000 for those who file jointly (per 2018 numbers).  You also might qualify for additional deductions such as the Child and Dependent Credit, adoption expenses, American Opportunity and Lifetime Learning Education Credit and Earned Income Tax Credit. 

3.)   Will I get more refund money if I file jointly?

This can vary, however, most couples who file jointly have a lower income tax liability compared to those who file separately.  In our practice, we have seen in most instances that it’s more beneficial for married individuals to file jointly, but there are some instances (as noted below) where filing separately result in lower overall taxes.

4.)  When should I consider filing separately?

If your spouse has a significant itemized deductions such as medical expenses or charitable contributions, it may be more beneficial to separate your tax liability. Or if one spouse works overseas while the other works in the US, it sometimes can be beneficial to file separately.  Sometimes it may also make sense to file separately if both spouses work and earn around the same income.

5.)   Do Common Law Marriages or Domestic Partnerships qualify to file jointly?

Per the Internal Revenue Code, couples that claim to be married under Common Law may file jointly if they live in a Common Law state.  However, since registered Domestic Partnerships are not married under state law, these taxpayers are not married for federal tax purposes and cannot file jointly.

6.)  My spouse passed away last year.  Can I still file jointly?

Yes, the surviving spouse is considered married for the entire year and you can file a joint return. 

7.)   I’m an expat living overseas and married to a non-U.S. citizen.  Can I file jointly?

Yes, but you may not want to!

If you are considering applying for a Green Card for your spouse with the intention of filing for U.S. Citizenship, it may be in your best interest to treat them as a resident and file jointly. 

But if your foreign spouse has employment or asset income and no intention of becoming a U.S. Citizen, it may best to file as married filing separately.  Otherwise, the non-U.S. citizen spouse will have to report all foreign income to the IRS.

(Note the U.S. taxes on worldwide income, which means even income earned outside the U.S.)

We have many clients in this situation where we run scenarios to help them determine if filing jointly makes sense or not.

8.)   I got divorced last year.  Do I file jointly or separately?

Much like marriage, if you’re divorce is filed by December 31, you are considered unmarried for the entire year and will file as either single or head of household. 

Filing taxes can be a tricky business and these questions only scratch the surface!  For all clients who are couples, we always prepare the tax return both ways to determine if filing separately is an option to consider. Please feel free to contact us for a consultation or if you are in need of tax preparation services.

Happy Valentine’s Day!