Does anyone do this? What are the indications for doing it? What are the pros and cons? There is a tax credit that we will likely only get a piece of next year. However, if we filed separately, one of us could probably claim the whole credit. But I don't know how it works and why they would let us do it that way? Any insights?
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I think unless your taxes are exceedingly simple, it is usually worth the money to get an accountant or at least go to some place like H&R block for advice from professionals. I got an accountant my second year working because I had a somewhat complicated situation (based on weird job structure, not high income) and not only did the accountant get me a return big enough that it paid for her own fee and more but also she reviewed the previous year I'd (attempted to) do myself and found I'd done it wrong and got me more money back from the previous filing too.
That being said, when I got married she mentioned the married filing separately thing and I think what she told me is that she always figures our taxes both ways to verify which is cheaper, but in general if your salaries are somewhat comparable then joint filing is often better whereas if you salaries are very disparate filing separate is often better. But there are always exceptions to that rule too.
So again, I'd hire a professional.
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I file this way - I have a ton of student loans and get them lowered by income based repayment. If dh and I file together, than it will look like we make too much money and my payments will be outrageous. That being said, I would much rather file together because the tax rate is super high when you file separately, and I always end up owing.
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I second hiring a professional. We filed separately for two years before our taxes got really complex, and when we hired our accountant, he looked back and re-filed those two years (for free!) and got us several thousand dollars back.
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I ran it both ways very easily in TurboTax. We would have owed about 5 times as much if we filed separately. They phase outs for a lot of deductions/credits are crazy low if you opt to file MFS
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We do have a professional. So I should ask them to run it both ways next year? We have very different incomes, so maybe it would help?
It seems kind of wrong that we'd get this big advantage one way and not the other, doesn't it?
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We run it both ways on turbo tax and usually end up filing separate. DH does it but I know it turns out that way for us bc our income levels are way different and one of us can pick up credits / deductions and one of us can't, so what you are describing is totally plausible.
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@Mrs. Jacks: just saw your reply. We're in the same situation with differing incomes. Seems wrong but that's how it turns out!
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DH and I have very different incomes and it works out best for us to file jointly. Our tax guy runs them both ways though, just to check.
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We have very different incomes (DH makes like 5x what I do) and it still works out to our advantage for us to file jointly, even though it means I can't, for example, deduct my student loan interest. You should definitely ask your tax person to check, though!
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Married filing separately usually makes sense when there are very different income levels, whereas jointly usually is in your favor for the majority. Just make sure the credit you are thinking of does not exclude married filing separately...a lot of them aren't permitted when filing separately.
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We do both in turbo tax. While our incomes are fairly different and we suffer the marriage tax penalty, it's more advantageous for us to file jointly.
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I'm in Canada but it's never better to file separately, at least here
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@danda: it's the adoption tax credit and I think it does exclude married filing separately if I read the it's code correctly just now. Bummer!
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I *think* I remember going through a worksheet to see if it would be worthwhile to file separately. In our case it is not.
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I would run it both ways but my dad who writes income tax software said it almost never better to file separately.
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@Mrs. Jacks: I'd be really surprised if your tax professional doesn't run the numbers both ways already. You can always ask them if they've done it. Or maybe they don't because of rules of the adoption tax credit...
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We filed separately the first two years when we lived in different states. His state had a state income tax while mine did not and a joint federal tax filing would have made me liable for state income tax too.
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@MrsKRB: This is why we file separately also. I makes a huge difference in my student loans monthly payment.
@Mrs. Jacks: You will probably not be able to get a lot of tax credits that you are entitled to if you filed separately. We can't claim our house, daycare, student loan interest and a few other things. But for us the monthly amount with student loans makes a bigger difference.
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We have a significant variance in incomes, and our CPA runs them both ways. We always owe, but come out better filing jointly. Even filing seperately for income based repayment of my loans would not lower my payments by much because I make too much. My friend works at H&R block and says they are basically using turbo tax, and she is not certified nor does she have an accounting degree. I would definitely use an actual CPA.
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@dc yoga bee: I have an actual cpa
our taxes are super complicated for a lay person like myself... And we tried H&R block once and the lady got really confused and made a big mistake regarding our rental property.
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Depends what state you are in. In my state, if you file seperately you each claim 50% of your combined income regardless of who made what. We have our accountant do it both ways and see what's better!
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I file separately because my DH is not a US citizen and therefore not subject to US taxes. I get basically no credits. I would definitely check with an accountant for your specific situation. .
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It's almost better to file jointly, since filing separately will mean you don't get to claim most deductions and credits. https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately
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@Mrs. Jacks: We do our own taxes using TaxAct... it costs around $20 I think to file that way? Anyway, at the end, it asks if you want them to compare filing separately vs. jointly. We asked it to run the comparison and it came out being much more advantageous for us to file jointly. In any case, maybe an online program like that would be helpful, even if you get your taxes done by a professional... just to see? I don't think you have to pay anything until you actually file, so you might be able to just look at a few different scenarios.
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@78h2o: that's a great idea
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@78h2o: we use Tax Act, too!
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We ran it both ways this year through turbo tax. Because I had a lot of medical expenses from IVF it worked out better for us to file separate, we owed about a $1,000 less.
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I dont know much about it personally but we had a pro do our taxes a few years ago and he told us to file jointly. Our incomes are almost identical, maybe that's why. Next year we are hiring an accountant again since our taxes will be very complicated.
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DH makes about 4x as much as I do, and it still comes out better for us to file jointly.
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I saw this article on yahoo this morning:
http://finance.yahoo.com/news/spouse-file-taxes-separately-130900076.html
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We have different incomes as well and filing jointly works better for us.
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If you file Married Filing Separately with Turbo Tax, does each spouse need to enter all of their info in separately? Out of curiosity I told Turbo Tax I wanted to amend my return and changed it to MFS and it added about $700 to my refund (which I already got). I'm not sure if I should really amend it or not.
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@Mrs. Jacks: I'm a CPA and when I was in public accounting, our tax software would automatically prepare a comparison between married fing joint and married filing separately. It should not take much effort, I would just put it on your CPA--you pay them good money to be experts on the tax law and that comparison should be quick and easy.
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33 comments