Hello, I’m Jill from TurboTax with some interesting information for married taxpayers.
If you are married and deciding whether it’s beneficial to file a joint tax return with your spouse, there are certainly issues you should consider first; but in most cases, filing jointly will save you money in tax.
Two of the filing status options you have when married by the end of the tax year are married filing jointly and married filing separately. And deciding which one to use generally comes down to two simple issues: your tax bill and joint liability.
When filing jointly, your tax return reports a single taxable income number that reflects your earnings, as well as your spouse’s. You then calculate the tax you owe using the married filing jointly tax brackets. There are six brackets—each of which imposes a different tax rate on specific portions of your taxable income. And as your taxable income progresses through each tax bracket, the tax rates increase.
The benefit of filing jointly over separately is that each tax bracket covers a wider range of taxable income than the married filing separately brackets do. Essentially, this means that more of your joint income is subject to lower rates of tax, which many times results in lower tax bill in comparison to calculating separate tax bills on the same earnings. And the larger the difference in the income that you and your spouse each earn, the more tax you will save by filing jointly.
Filing a joint return can reduce your taxes even more by itemizing deductions and taking all available tax credits that you and your spouse are eligible for. This is because when you file a separate return, the IRS places significant limitations on your ability to itemize deductions and to take tax credits – regardless of the fact that you and your spouse would otherwise qualify if filing a joint return instead. One drawback of filing a joint return is that you and your spouse are separately responsible for all tax—not just the tax that relates to your own earnings.
To illustrate, suppose you earn $50,000 per year and your spouse earns $100,000. Although you earn one-third of the income, you are solely responsible for the tax that is due on $150,000 if your spouse is unable to make payment. In other words, the IRS will not allocate an income tax debt between spouses who file joint returns. Under very limited circumstances, however, the IRS can grant various types of relief that either eliminates the joint liability or reduces the amount of tax you are responsible for.
Remember, when you use TurboTax to file your tax return, we’ll ask you simple questions and recommend the best filing status for you.