Married couples can choose either option. But is one better than the other?
After years of reflexively checking the “single” box on your tax return, the time has finally come: you’ve gotten married! Congratulations, by the way. Time to select the “married” option instead, right? Not so fast.
You’ve got two choices now: married, filing jointly or married, filing separately. And it may not be immediately clear which one is the better pick.
Or maybe you’ve been married for a while, you’ve decided it’s time to take a closer look at your taxes, and unfortunately, the wisdom your married life has brought you does not seem to include any deeper insight into the tax code.
Either way, you have some practical questions about filing taxes as a married couple. Should you file jointly, or separately? There’s a clear answer for most taxpayers.
The basics
- Filing status affects things like tax brackets, deductions, and credits
- Filing jointly should lead to better tax outcomes for most people
- Filing separately should only be done in rare situations, and only if you have a specific reason to keep your finances separate
- If you are reading this article right now, and you are married, you should probably just file jointly
How does filing status work?
When you file your personal tax return, one of the first things you need to think about is your filing status. Determined by your household situation, filing status divides returns into a few broad categories, each of which work a little differently.
- Single
- Head of household
- Married, filing separately
- Married, filing jointly
- Qualified widow or widower
“Married” appears twice on this list. Married taxpayers can choose between two options: each spouse filing their own separate tax return, or both spouses filing one tax return together.
What does filing status affect?
The most active way your filing status will impact your final tax outcome is through tax brackets, or how much of your income is taxed at which rates. Different filing statuses get different sets of tax brackets, and thus different tax bills for the same total income.
Filing status also affects deductions and credits. Depending on how you file, your standard deduction may get larger or smaller, you may be able to deduct different amounts, and you may qualify for different deductions and credits altogether.
One key detail to keep in mind: married couples must both choose the standard deduction, or both choose to itemize their deductions. No mixing and matching. And this applies whether you’re filing jointly or separately.
Should I file jointly or separately?
Joint filing status was created to prevent married couples in the 1920s from splitting their income to avoid taxes, but over the years, it’s evolved into something that gives married couples a significant leg up. We rarely recommend that married couples file separate tax returns.
It comes down to all of the factors we mentioned above – tax brackets, standard deductions, qualifications for tax credits, etc – all being firmly weighted in the advantage of married, filing jointly.
When you’re married, filing jointly, more of your income is taxed at a lower bracket. You get double the standard deduction. And you’re able to qualify for the earned income tax credit, the American opportunity credit, and the lifetime learning credit, none of which are available to couples filing separately.
To put it simply, filing jointly will nearly always get you a smaller tax bill.
Finally, isn’t it nice to only be responsible for filing one tax return? It’s just easier.
When is filing separately better?
You might be wondering if there are any situations in which it’s better for a married couple to file separately. The quick answer (when it comes to taxes, anyway) is “no, not really,” but it does occasionally happen.
Sometimes keeping incomes separate is more important than advantageous tax rates, like if a married couple is each bringing an independent fortune to the table. Or, for a sillier example, if one spouse receives significant income from organized crime and the other would rather not get between their spouse and the law.
One possible reason that filing separately could actually result in a smaller tax liability is if one spouse had significant unexpected medical expenses. Filing separately could allow you to deduct more of that medical bill.
Typically, married couples who choose to file separately pay more in taxes. You can play with the numbers and see how it all shakes out, but don’t be surprised if "married, filing jointly” is the clear winner every year.
The bottom line
The easy answer here is that most married couples should be filing jointly. Only in very rare cases will filing separately result in a better tax outcome.
If you suspect that you may be one of those rare cases, or if you have other questions or concerns about your taxes, schedule a call with DiMercurio Advisors. We’ll help you make the tough decisions about your next tax return.
