I get asked this question a lot, should we file a married filing joint or married filing separate return? I have my opinions but here are the facts:
It doesn’t matter how long you were married during the year. For tax purposes, you are considered married if you were married on the last day of the tax year, even if you are in the process of a divorce that has not yet been finalized.
Assuming you meet the marriage criteria, how do you decide? Start by considering the disadvantages of filing separately and think of how many items apply to your situation. Keep in mind that if you file separately, you and your spouse must choose to both take the standard deduction or both itemize – you cannot take separate approaches. Your standard deduction drops significantly when filing separately, and many itemized deductions are reduced through income phase-outs or eliminated entirely.
Filing separately reduces or eliminates potential tax credits that are subtracted directly from your tax bill. For example, you cannot take the Earned Income Tax Credit (EITC), the Elderly or Disabled Credit, or the educational credits (American Opportunity Credit or Lifetime Learning Credit) or adoption credit.
Don’t forget about community property. Arizona, California and other states are Community property states; therefore, you need to split property (your income and deductions) for tax purposes. Should you both itemize, you may be faced with a hideous pile of paperwork to split assets 50/50.
Those are pretty powerful arguments to file jointly. However, there are a few reasons to consider filing separately.
Questionable Tax Practices You should file separately if your spouse is stretching, or outright breaking, the tax laws. Signing a joint return makes you responsible for paying any taxes, penalties, and fines that your spouse incurs but refuses to pay.
Separation/Divorce Separating your finances as part of an in-process separation or divorce lends itself to also filing your taxes separately.
When in doubt ask us. We can run an optimization report to determine the best tax situation for you.