If you are married you have the option to file jointly or separately on your federal taxes- but which should you choose?
While the IRS recommends that married couples file jointly, there are circumstances that may be a greater benefit to you if you file separate.
Couples who file jointly have access to a lot of deductibles, instantly! By filing jointly, you and your spouse are able to deduct two exemption amounts from your joint income. Since your joint income is higher, your threshold for certain taxes and deductions is greater.
Want to file separately? You may potentially receive a higher tax with a higher tax rate, and are disqualified from tax credits such as: Earned Income Tax Credit, American Opportunity and Lifetime Learning Education Tax Credits, Exclusion or credit for adoption expenses, and Child and Dependent Care Tax Credit. You are also unable to take the deduction from student loan interest.
It may seem that filing jointly is the best option, however, the IRS only allows you to deduct the amount of out-of-pocket medical expenses that exceed 10% of your adjusted gross income (AGI). So, it can be challenging to claim most of your out-of-pocket medical expenses if you or your spouse have a high AGI.
Still unsure? We can file your taxes both ways and see which filing status generates the biggest return/lowest balance. Paragon Accountants is here to help – no matter which way you decide to file! Get in touch with us to answer any tax filing questions.
