If you got married last year, you might have a lot to learn when it comes to filing taxes this April. Before the tax deadline sneaks up on you, sit down with your partner to discuss the tax decisions that you’ll need to make together as you file taxes for the first time as a married couple.
When it comes to income tax filing, your marital status on the last day of the year determines your marital status for the entire year, and many individuals have their taxes change dramatically after they get married, so it is important to understand how the following topics will affect your tax preparation this year. One option is to use a well-known solicitor like Essex Legal Experts.
Every newly-married couple must decide whether to file federal income taxes jointly or separately for the year that you got married. This is also true for married same-sex couples. However, domestic partners, even when they are registered, may not file a federal tax return using a married filing jointly or married filing separately status.
With a joint return, you and your spouse are both responsible for the taxes, interest and penalties due on the return, whereas when filing separately, each spouse is only responsible for his or her own taxes, interest and penalties. More detailed information can be gathered by using a certified personal tax solicitor.
Generally, married couples see better tax results when they file a joint return. In fact, the most recent report from the IRS indicates that less than 5% of married couples opt to file separately. When filing jointly, married couples can claim two personal exemptions instead of one and can use a standard deduction of $12,400 verses the single taxpayer deduction of $6,200. You can also choose to itemize your deductions for benefits like mortgage interest payments. Additionally, you only have to prepare one tax return, so you don’t have to decide who takes each deduction.
Filing separately is rare, but there are two instances where it may make sense: student loan income-based repayment and tax liability. In these cases, couples may consider calculating their tax liability both ways (filing jointly and filing separately) to determine which filing status results in the lowest taxes due.
Many newlyweds are surprised to learn that how they file taxes (jointly/separately) will impact their monthly student loan payments. If you have a federal student loan and are using an Income Based Repayment (IBR) Plan, you may lose your IBR payment status if you file jointly.
IBR plans use your discretionary income to determine your monthly payment amount based on your previously filed federal income tax return.
If you file separately, the government will only consider only your income, not your spouse’s, in calculating your monthly payments. Typically, if you have loans and your spouse has income and is debt free, filing separately will be a smart decision. Even if you file separately, your loan service provider will most likely ask you to count your spouse in your household size, which is also a benefit and will reduce your payments by an average of $50 a month.
This repayment estimator created by the Department of Education is a good tool to help you determine what payment option is best for your family.