Should We File Taxes Jointly or Separately?
When filing income taxes, you must decide on a filing status. A married couple has the option of filing either separately or jointly. There are advantages to filing either way, depending on the income level and deductions. Filing separately sometimes results in a better outcome for taxes when both spouses work and have a relatively high income level. If they file separately and each claim children, they may end up with a lower tax rate than if they filed together. The standard exemptions are not different between the two filing statuses, but a lower tax rate may be obtained by filing individual returns.
Using Filing Status to Maximize Refunds
In the event of a lower income level, filing jointly will allow the couple to use tax credits that would not be available for those filing separately. Things such as earned income credit is not available when spouses file separately. When filing jointly, a married couple can receive an increased refund by utilizing this credit if their income level falls into the allowable level.
Using Filing Status to Decrease Taxes Due
Some couples file separately simply to save on taxes. In some cases, this does work out. However, when you compare the two options, filing jointly does not usually result in higher taxes. Because when it is broken down, filing jointly and filing separately allow for the same deductions and allowances. However, certain tax ranges may provide a lower tax percentage when filing separately than would be allowable filing jointly.
Self Employment and Filing Status
In most circumstances, married couples living together will file a joint tax return to take advantage of all of the tax credits and allowances. In situations where one spouse may be self employed and the other works for a corporation, filing separately may make more sense just simply due to the different tax laws associated with self employment and small businesses.
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