The IRS gives Massachusetts married couples the option to file their federal income tax returns jointly or separately. Most American couples choose to file taxes jointly. However, there are situations when you might want to file taxes separately. What are the reasons to file taxes separately when married? Although the IRS accommodates couples who want to file their returns separately, the agency strongly encourages joint filing.
Despite the tax breaks available to those filing jointly, many couples still choose to go solo with their tax returns. The reasons for couples filing separately are varied and might be influenced by factors like a difference in paycheck size, the source of income, and student loan status. Here’s a detail look at the reasons to file taxes separately when married.
For some couples, there’s a difference in paycheck size and medical bill deductions
For out-of-pocket medical expense deductions, the IRS requires that the bill must exceed 7.5 percent of the income. If filing jointly would increase the overall income and make a medical bill deduction ineligible, a married couple might make a strategic decision to file separately.
The IRS taxes earnings from investments at a lower rate compared to earnings from work. Therefore, the spouse who earns their income from capital gains or dividends might enjoy a lower rate than the spouse earning their income from paychecks. In that case, married couples might have the ability to lower their overall tax bill if they file separately.
As education becomes more expensive, Americans are turning to student loans to make it through college. However, limited income has left many people struggling to clear their student loans. There have been calls to cancel the debt. While the loan requires monthly repayment, borrowers in financial difficulty can get on income-based repayment plans. If one of the spouses is on this plan, it might be best to file tax returns separately to a bigger relief on repayments.
For a couple that’s preparing to divorce, it might be a good idea to file taxes separately. Also, if a spouse has a complex tax situation, the other might want to go solo to avoid being caught up in potential liabilities that might impact their spouse.
Some couples choose to keep all of their finances separate
When some couples get married, they decide to keep their financial lives separate. It might be as simple as a spouse wanting to continue with the accountant they used before the marriage to prepare their tax returns. If a spouse isn’t comfortable switching to their partner’s accountant, the couples might agree to do their taxes separately to avoid potential frictions. Another reason to file separately might arise where a U.S. taxpayer is married to a non-U.S. spouse and the couple lives abroad.
Finally, the IRS has a strict tax filing deadline, and defaulting can lead to serious penalties. Therefore, it helps to decide whether you’re going to file jointly or separately early. You should make the preparations in enough time to avoid missing the tax deadline.
Should you be in the midst of a divorce or contemplating divorce, contact the Law Offices of Renee Lazar at 978-8444-05 to schedule a FREE one hour no obligation consultation.