Which is better, married filing jointly or married filing separately?

March 04, 2015 by Dave Du Val, EA
man and woman getting married

Hey Dave,

My wife and I are preparing our taxes, and, due to her employment situation(s) and our investments, we have received a number of 1099s that essentially leave us owing the IRS around $5,000.

We reached this number filing as married filing jointly. We made approximately $55,000 after our deductions, but, of that, my wife made $14,000 and had no taxes withheld. My question is this: Would filing as "married filing separately" benefit our situation at all? It would lower my income to around $46,000 taxable (including investments) and leave hers at the number I mentioned earlier.

Other pertinents - we rent, own no real estate assets, and have a dependent minor child.

Ezekiel

 

Ezekiel,

A married couple has the choice of filing a joint return or filing separately, whichever results in the lowest tax liability. Generally, the Married Filing Jointly status results in a lower tax liability for a couple in your tax bracket, with the situation you’ve described. Some tax credits, deductions, and other tax benefits are limited or eliminated when the Married Filing Separately status is used.

Because each situation is unique, and states with community property rules have an effect on the reporting of income and deductions, it is best to prepare one joint return and two separate returns in the tax program, using the correct rules for your state. This method may help determine which status is more beneficial in your circumstances. Also, please keep in mind that if one of you itemizes your personal deductions, the other cannot take the standard deduction but must also itemize.

And, on a positive note, it sounds like your investments are doing well. Congratulations!  You may want to adjust your W-4, for withholding at work to better account for the increase in income. Most tax software can handle this situation quite easily for you.

Deductibly yours,

Dave

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David E. Du Val, EA
Chief Compliance Officer for TRI Holdco

 

Dave Du Val, EA, is Chief Compliance Officer for TRI Holdco. Inc., the parent company of TaxAudit, and Centenal Tax Group. A nationally recognized speaker and educator, Dave is well known for his high energy and dynamic presentation style. He is a frequent and popular guest speaker for the California Society of Tax Consultants, the California Society of Enrolled Agents and the National Association of Tax Professionals. Dave frequently contributes tax tips and information to news publications, including US News and World Report, USA Today, and CPA Practice Advisor. Dave is an Enrolled Agent who has prepared thousands of returns during his career and has trained and mentored hundreds of tax professionals. He is a member of the National Association of Tax Professionals, the National Association of Enrolled Agents and the California Society of Enrolled Agents. Dave also holds a Master of Arts in Education and has been educating people since 1972. 


 

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