Jointly or separately: how is it more profitable for a couple to file a tax return - ForumDaily
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Jointly or Separately: What is the Best Way for a Couple to File a Tax Return?

Married couples have a choice during the tax period: they can file two individual returns or one joint. In most cases, joint filing is more profitable, but there are cases when it is better to file two separate declarations. About how to make a decision that will be more profitable for your budget, ForumDaily asked experienced accountant Michael Koloden.

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The coronavirus bailout and advance payments of the child tax credit have made a big difference to the tax situation for some families, especially if one spouse earns significantly more than the other. For such couples, it is better to contact a specialist to fill out declarations, who can calculate both filing options - separate and joint - and determine which one is more profitable in each specific case.

Benefits of Joint Filing
  1. You may qualify for a lower tax rate

Generally, a couple filing a joint return can expect lower tax rates. In addition, some additional tax benefits are available to such taxpayers. In order to understand which option is more profitable for you, you need to make a calculation, taking into account parameters such as the income of each of the couple, as well as deductions and loans to which you are entitled. Better to have it done by a specialist. A non-professional may overlook or miss some important trifle, and as a result, an attempt to save money will result in additional costs.

  1. More loans and deductions

Some tax credits are only available to couples if they file a joint return. Couples filing separate returns are not eligible for the Earned Income Tax Credit, American Opportunity Credit, or Lifelong Learning Credit. In addition, married individuals who file separately cannot deduct student loan interest from taxes.

In many cases, you also cannot qualify for a dependency care loan or adoption costs if you are married but are filing separately. But there are exceptions with these loans, check their availability in your particular case with a tax specialist.

The company will help you calculate all the nuances and choose the best option for filing a declarationMICHAEL KOLODEN CPA PC: 7308 18th Avenue, Brooklyn NY 11204; tel. (718) 360-5337; e-mail: [email protected].

  1. Contribution to Roth IRA

A Roth IRA is an individual retirement account to which contributions are tax-free. However, the right to contribute money to it depends on income. Married couples filing joint returns have a much higher income threshold than married people filing individual returns. Couples can contribute to a Roth IRA if their adjusted gross income was less than $208 in 000.

However, if you are married and filing separate returns, you can only contribute to the Roth IRA if your income in 2021 was less than $10.

Situations when separate filing of declarations is more profitable
  1. The income of both spouses is approximately the same

Some couples with a high combined income may receive lower tax rates if they file separately.

However, low-income couples may end up paying more taxes if they file separate returns. Before filing a declaration, it is better to ask a specialist to calculate both options.

The company's specialists will help you figure out which declaration format is beneficial for you.MICHAEL KOLODEN CPA PC: 7308 18th Avenue, Brooklyn NY 11204; tel. (718) 360-5337; e-mail: [email protected].

  1. You have large medical debts

Filing separate returns may give you access to some tax credits to help pay off medical debt. For example, you can deduct medical expenses that exceed 7,5% of your adjusted gross income. If one spouse has high medical expenses and a lower income, filing a separate return may make it easier to cross the 7,5% income threshold.

However, in some cases it is more profitable to take the standard deduction, which is now $12 for individual declarations and $550 for couples. It is better to calculate the option that is right for you with the participation of a professional accountant.

  1. You don't want to be responsible for each other's tax liabilities

Some couples manage their finances separately and don't want to be the victim of an error or inaccuracy in their spouse's paperwork. In addition, it is better to file separate declarations if you are thinking about a divorce or a break in a relationship.

Remember, the IRS considers divorced all taxpayers who end their marriage before December 31 of the year for which they file a return. Therefore, even if you lived together for almost the entire year, maintained a common budget, but finalized your divorce before the end of December 2021, you will have to file your returns separately—you simply do not have the right to file jointly.

Material prepared in partnership with

MICHAEL KOLODEN CPA PC

Web: michaelkoloden.com
facebook: 
https://www.facebook.com/MichaelKolodenCPA
address: 7308 18th Avenue, Brooklyn NY 11204;
cell: (718) 360-5337;
Email: [email protected]

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Children, marriage, divorce: life events that complicate your tax situation and require the help of an accountant with a declaration

Deductions, limits and credits: important tax nuances to consider when filing a return for 2021

The tax season has begun: how to prepare a declaration without errors and quickly get a tax refund

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Educational program tax returns married couple Michael Colden
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