Generally, it is more beneficial to file jointly due to lower tax rates compared to those filing separately.
Couples who file together can usually qualify for multiple tax breaks subject to certain limitations, such as :
- Higher standard deduction of $25,900 for tax year 2022
- You can also claim up to $25,000 of passive activity loss
- Earned Income Tax Credit
- Education Tax Credits such as the American Opportunity and Lifetime Learning Credit
- Exclusion or credit for adoption expenses
- Child and Dependent Care Tax Credit
- Student loan interest deduction
If you file a separate return from your spouse, you are often automatically disqualified from these tax credits.
Another reason is… if you live in a community property state, filing a joint return is more convenient, because you’ll avoid the complex tax rules applying to married filing separately.
Reasons to File Separately
Couples can benefit from filing separately if there’s a huge gap between their income, and the spouse earning less income is eligible for substantial itemized deductions like unreimbursed medical expenses. This is because some deductions are subject to a phase out level based on income, the higher the income, the lower your allowed deductions would be.
Reasons to file separately can also include separation and pending divorce
Or to shield one’s spouse from tax liability issues for questionable transactions.
There are also instances when a taxpayer is precluded from filing jointly with a spouse. One of the most common examples is if the spouse is neither a citizen nor a resident of the US at any time during the year. In such cases, the taxpayer generally uses the status of married filing separately on the US tax return.
The Bottom Line
Determining which filing status is more beneficial for a couple depends on a lot of factors such as; residency, level of income, available deductions, and also personal circumstances. If you have questions about filing status and any other tax-related questions, please don’t hesitate to reach out to us.