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Should loving couples file their taxes jointly or individually? This is a question worth pondering every tax season to potentially save some bucks.
Indeed, the choice is yours—joint filing or individual filings. Couples are free to select either option, and the choice can significantly impact their financial situation. Generally, joint filings are more advantageous for taxpayers, but there are circumstances where individual filings may be the way to go.
Choosing joint filings means you'll receive a single combined tax assessment for both partners. Income from both sides is added together, then averaged out, before the income tax for these averages is calculated and summed up. The final income tax for the couple is determined. However, Daniela Karbe-Geßler from the Federal Association of Taxpayers maintains that couples with substantial income disparities may benefit from joint filings, but only when both partners are fully taxable and have spent a portion of the tax year together.
On the other hand, individual filings might be more advantageous in specific situations. For instance, if one partner has received substantial replacement income, such as unemployment, sickness, or short-term work benefits, individual filings could be more advantageous. Although these benefits are often tax-exempt, they can increase the individual's tax rate. Additionally, if one partner has incurred high extraordinary expenses or losses, individual filings might be more beneficial.
To make an informed decision, couples should evaluate their circumstances or consult a tax advisor, tax program, or tax assistance association. Even if a tax assessment has already been issued, couples can still change their filing status, but only before the assessment is finalized.
Couples may find individual filings beneficial in particular circumstances, such as recipients of replacement income or those with high extraordinary expenses or losses. In cases where individuals receive replacement income, they should be aware that these benefits can increase their individual tax rate, potentially making individual filings more advantageous.
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Consider several factors when deciding between joint above separate filings:
- Higher Income Thresholds: Joint filers have higher income thresholds for tax brackets, meaning they can earn more before moving to higher tax brackets.
- Standard Deduction: Joint filers have a higher standard deduction, which typically ranges from $29,200 in 2024 to $30,000 in 2025, compared to separate filers, whose standard deductions are $14,600 in 2024 and $15,000 in 2025.
- Tax Credits and Deductions: Joint filers qualify for more tax credits and deductions, such as the Earned Income Tax Credit, Child and Dependent Care Credit, and education credits.
- Simplified Process: Filing jointly simplifies the tax preparation process, as only one return needs to be filed.
- Student Loan Repayment: Filing separately can lower student loan payments under income-driven repayment plans, as payments are based on individual discretionary income rather than joint income.
- Medical Expenses: If one spouse has high medical expenses, filing separately can help them qualify for medical expense deductions more easily, as the threshold is lower for individual filers (7.5% of AGI) compared to joint filers (10% of AGI).
- Debt and Financial Independence: Filing separately can help manage debt, particularly if one spouse has significant IRS debt or other financial obligations they prefer not to share with their spouse.
- Personal Preference and Flexibility: Filing separately can maintain independence and flexibility in spending, saving, and investing while working together to reach shared financial goals.
- High Medical Expenses: Filing separately can make it easier to deduct high medical expenses for one partner.
- Student Loans and Income-Based Repayment Plans: Filing separately can lower monthly student loan payments under income-driven repayment plans, as payments are based on individual discretionary income.
- Legal Issues: If one partner is suspected of a crime like fraud or tax evasion, it may be beneficial for the other partner to file separately to protect their financial situation.
By considering these factors, couples can make an informed decision about joint filings or individual filings. Engaging a tax professional can also provide personalized advice tailored to their specific circumstances.
