Filing status types
There are five types of filing status options in the U.S. These include head of household, married filing separately, married filing jointly, qualified widow or widower, and single. Most unmarried individuals file as “single” while those who are unmarried but provide most of the support for another person can qualify as the “head of household.” However, the IRS is strict about those who can fall into this category and it is in your best interest to contact your local IRS office to ensure you can file this way before doing so. To be considered a “qualified widow or widower,” you must have recently lost a spouse and be supporting a child at home. The last two types of filing statuses are for married couples who want to file jointly or separately.
Pros and cons of filing jointly
Most married couples choose to file jointly because they can benefit. Using this method, you and your spouse file a single tax return with both of your income included as well as any possible deductions or credits. Some benefits of filing jointly include the opportunity to claim things like the Earned Income Credit, the Lifetime Learning Credit, and the American Opportunity Credit, according to NerdWallet’s Tina Orem. Married couples also have the chance to take the tuition and fees deduction or the student loan deduction. Because the tax ranges for married couples are different than those who are single, filing jointly could bring a higher earning spouse into a lower tax bracket. As a result, you and your spouse may not owe as much had you filed separately.
On the other hand, filing jointly means taking responsibility for your spouse and all of their financial actions. Orem points out if your spouse might be hiding income or if you are on the verge of a divorce, you should probably file separately. Additionally, if you are recently married and one spouse has had tax issues in the past, it might be in your best interest to file separately until everything is sorted out to avoid adding more factors into the mix.
Pros and cons of filing separately
It is important to point out filing separately while married is not the same as filing under the single status. The tax brackets for these two categories are vastly different and bring different benefits, depending on your financial situation. Therefore, you cannot file as “single” if you are married and would like to file separately from your spouse. One benefit of filing separately is if both you and your spouse are high earners. “The way the tax brackets are calculated, some high-income couples may end up with lower tax rates if they file separately,” says financial journalist Kimberly Lankford, writing for U.S. News & World Report. Large medical bills could also be a reason to file separately from your spouse. By itemizing your return, “you can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income,” says Lankford.
Filing separately does exclude you from receiving the deductions and credits you could qualify for when filing jointly. Along with the previously mentioned credits, other things you will miss out on include the adoption credit and the ability to qualify for a full IRA contribution deduction. Additionally, if one spouse itemizes their deductions, the other one must do the same.
It is important to consider various factors when filing taxes as a married person. If you are ever in doubt about which method is best for you, consider speaking to a tax professional for additional information. s