Most people consider the task of filing taxes nightmarish that they look for ways to simplify it. This is why most folks rely on H&R Block to make tax filing more manageable for them. And it’s not a surprise why that is. According to some online sources, you can get your taxes filed for only $125.
But what if you can actually get some tax cuts if only you’re willing to combine yours and your spouse’s taxes? The perks can be very attractive but will you be willing to double the effort just to get them?
Is it really a good idea to combine your taxes with your spouse or are you both better off doing your taxes separately? We’ll help you weigh your options below.
Why You Should Consider Filing Taxes Together
According to experts, being married entitles you to certain perks that other filing statuses cannot offer. As the IRS wants people to file jointly, they’re offering certain tax breaks that might entice people to take this route. What are these benefits? Here are a few examples that might convince you to consider filing your taxes jointly with your beloved:
You can enjoy higher tax deductions.
While not a lot of people think about it as a more practical approach to starting a household, getting married can actually make good financial sense for a lot of couples. According to the Tax Foundation, some marriage bonuses can amount up to 21% of a couple’s combined income. So for some couples, getting married means getting a large amount of savings in terms of tax breaks.
While this sounds amazing, it should first be noted that not everyone can get such savings. It only really applies to couples with one partner making significantly more than the other. Combined income households are expected by the IRS to be on the higher end of the range, so if your combined incomes don’t amount to a lot, you’ll fall under the low-income bracket for couple filers. This will then result in a lower tax bill.
You can take advantage of multiple tax credits.
While a tax credit isn’t exactly a deduction, it’s still extra money that you can get from the government, so it should always be welcome. Couples who are filing taxes jointly can take advantage of offers like the following:
- Earned Income Tax Credit
- Child and Dependent Care Tax Credit
- Child Tax Credit
- American Opportunity Tax Credit
A lot of people don’t know that they qualify for these, so it’s best to check if you’re one of them.
There are some consequences when you file taxes separately as a married couple.
Since the IRS is encouraging people to file their taxes jointly, they implement certain consequences to those who wish to file taxes separately. Some examples of these are the following:
- Automatic disqualification from the credits and breaks mentioned above.
- Smaller deduction on IRA contribution.
- Disqualification on student loan interest deduction.
- Lower capital loss deduction limit.
Why You Should File Taxes Separately
Filing taxes jointly isn’t the best option for all couples, however. For one, doing so is a bit more complicated, especially once you already got the hang of filing your own taxes. So when should you ignore the perks of filing jointly? Here are some instances that will tell you why you might be better off paying taxes separately from your spouse:
When there are liability issues that might come up.
Lots of couples file taxes separately to avoid liability issues. If there’s a possibility of having some complications with the way your spouse files their taxes, you might not want to be embroiled in the mess.
When you can get more deductions as a single filer.
This often happens when the spouse with a lower income faces a large amount of expense that they can only count as a deduction in full when they file taxes separately. Sometimes, tax deductions of this nature are worth more than the perks of filing jointly, so it’s crucial to consider such details as well.
As the information above might have already clued you in, the impact of tax relief you’ll get depends largely on your situation. It will be very difficult to generalize on this regard so some experts say that you might be better off preparing your taxes both ways to see what works for you better. This might be a more complicated approach but with the savings you can get, it’s definitely worth considering.
By doing this, you can see which approach works best for your financial situation. If you’ll do things correctly and use the right tools to ensure the accuracy of your numbers, things won’t be that difficult for you.