Even as tax season winds down, it’s still important that you consider tax strategy as part of your financial picture. Many couples file jointly, and while it can sometimes help save on your taxes, it isn’t always the best option in each case! Here are some important factors to consider if you are filing taxes as a married couple.
- Determine if you can file jointly. If you have been recently married and you’d like to file jointly, you have to have been married by December 31st, 2022 to do so. If you were married on January 1st, 2023 or later, you will not be able to file jointly for 2022 (even though your taxes are due in 2023). [1]
- Consider your deductions and credits. Married couples filing separately can’t claim many things that will reduce their bill or increase their refunds. If you file separately, you can’t claim student loan interest deductions, tuition and fees deductions, education credits, or earned income credits. [2]
- Consider your itemization options. If you are married and filing separately and one partner is going to itemize their tax return, both partners have to itemize.[3] Usually, it is only useful to itemize if you can itemize more than the standard deduction, so unless both partners will benefit from separate itemization, filing separately is likely the wrong move. However, if one partner has very significant deductions (say they have a very large medical bill that is way over the standard deduction, and they are in a low tax bracket), it can occasionally be better to file separately. [4]
- Determine the best income option for you. If there is a large difference in income between partners, it can be very useful to file jointly. If one spouse makes $8,000 a year and the other makes $55,000 a year and they file jointly, they will only have to pay 12% of their income in taxes. If they had filed separately, the spouse making $55,000 would have had to pay 22%.[5]
Married tax brackets are usually determined by values that are approximately double the single tax bracket values. A single person making $44,726 a year is taxed at the same rate as a married couple making $89,541. [6] But most households don’t have exact equivalent incomes from both spouses. So if there is an income inequality, it can often reduce the overall tax bracket you are in if you file jointly.
Tax law and tax suggestions are always going to be complicated, but there are people out there who can help you to understand the best options for you. If you are looking for financial guidance, Click HERE to reach out to us at SouthPark Capital and we can talk through suggestions and options for your specific situation.
[1-4] https://www.investopedia.com/articles/tax/10/file-taxes-couple.asp
[5-6] https://www.thebalancemoney.com/married-versus-single-tax-filing-statuses-4690761
[5-6] https://www.thebalancemoney.com/married-versus-single-tax-filing-statuses-4690761
