Which is better for your financial situation: filing taxes jointly or separately?
So you’ve tied the knot. Congrats! Getting married comes with a lot of firsts, which can be exciting and challenging. For one, this is likely the first time you’ve had the option to file taxes jointly — but you can also choose to file as “married filing separately.”
Here are some considerations to help you decide how to file your taxes, plus tips if you decide to file your taxes jointly.
Should You File Your Taxes Jointly?
If you’re dealing with any of the following situations, it may make sense to file separately until these wild cards are resolved and you’ve made all your financial decisions together as a couple for a full year:
- Deductions: If you or your spouse can take a larger itemized deduction than the combined standard deductions of filing separately — it might make sense to keep your filing status separate, even though both spouses will have to itemize. Talk with your tax preparer to make check which option is better for you.
- Capital gains: When you or your spouse realize a gain on a stock market or real estate investment this year, you need to pay taxes on that gain, counting it as additional income (also known as capital gains). If that income increase pushes your joint income into a higher tax bracket then filing separately may lower your tax rate, depending on your individual incomes.
- Medical Expenses: The IRS sets a limit on the amount of unreimbursed medical expenses that you can deduct. The limit is based on a percentage of your adjusted gross income (AGI). So, if your AGI is lower when filing separately, you may be able to deduct more of the expense than if you filed jointly.
- Student Loans: Some federal student loan programs, such as Income Based Repayment (IBR) require you to file separately if you do not include your spouse’s income in the calculation of your student loan payment. Check with a tax advisor or contact your federal loan servicer for questions on what is best for your situation.
When to File Jointly
It makes sense for most couples to file taxes jointly because the tax rate is usually lower and you can claim higher standard deductions. You are also eligible for several tax breaks that you can’t claim when filing separately, including:
- Tuition and fees deduction
- Student loan interest deduction
- Tax-free exclusion of U.S. bond interest
- Tax-free exclusion of Social Security benefits
- Credit for the elderly and disabled
- Child and dependent care credit
- Earned income credit
- American opportunity or lifetime learning education credits
Tips for Filing Taxes Jointly
If you decide to file taxes jointly, ask these questions before you get to your tax preparer’s office to make the process go smoother:
- Where are your receipts? When filing jointly, you need twice the paperwork: two sets of W-2s or 1099s, along with any other relevant documents you may need to file. As soon as you start life as a married couple (or ideally, before) set up a system for organizing and storing that paperwork so you won’t rush around trying to unearth it come tax time.
- Did one of you change your name or address? Save yourself a headache at tax time by letting the government know right away if either you or your spouse changed your name or address. To legally change your last name, contact the Social Security Administration to get a new Social Security card. For a change of address, contact the IRS and fill out a change of address form. Doing so will prevent any return from bouncing back with database mismatch glitches, especially if you’re filing online.
- Have you spoken with human resources at work? If you have a new last name, let the HR department at your office know. They’ll change your name on your W-2 so it will match what’s on your tax return.
- Did you get married in the middle of the tax year? If the tax year starts in January, how do you file taxes if you got married in October? Fortunately, the IRS rules on this are very straightforward: Your marital status on December 31 determines your tax status for that year.
The typical advice is that you and your spouse are likely better off filing jointly. However, if you are in one of the situations discussed above, it may be smarter to file separately. That said, every couple’s financial situation is unique, and the better option for you might change year to year. Sit down with your tax preparer well before tax time to discuss your filing status.
Get more help filing your taxes at the Regions Tax Center.
