This is the first time taxes have come around since I got married. I’m wondering if my wife and I should file jointly or seperately. Currently, she is not working, so our only income is my salary. We have no legal dependants. In general, is it better for someone in a situation like mine to file jointly or seperately?
TIA!
–FCOD
It is almost always better to file jointly. This thread deals with some of the issues.
Keep in mind that your only legal choices are Married filing jointly, and Married filing seperately. Neither of you can file as single or Head of Household.
I used to work as a tax preparer for a non-profit. ALWAYS file jointly if you’re married, even if you’re separated (but not divorced). Think of it as the government wants you to reward you for staying married, so they give you little breaks.
I have filed both ways in the past…
If you use one of those tax preparation programs you can run both scenarios and see which one works out best for your situation. I would bet that filing jointly would be the best, but it doesn’t hurt to check out both ways.
Okay… I don’t really understand US tax stuff… I don’t even really understand family options for canada revenue, since I’ve only ever prepared my own return as ‘single.’ (I had some returns prepared by my parent’s accountant as a dependent, I believe, but never really saw them.)
What’s the point of ‘head of household’ if neither half of a married couple can pick it? Is it only for an unmarried (or widowed) person who has underage dependents??
As a slightly related question, if a couple does Married filing seperately, what (if anything) do they do about deductions for their kids? I’m curious here.
(As an aside, I just netfiled my 2005 return to Canada revenue last night, so that’s why tax stuff is so much on my mind.)
My father is a CPA, and he’s told me about clients he has that benefit from filing separately. The only case I recall him telling me of is where the husband earns somewhere around $100,000 per year, but the wife is a doctor of some kind and earns over $300,000 per year. In their case, they pay less by claiming two incomes (a $100,000 and a $300,000) than by claiming one income of $400,000. From my understanding*, this is because the tax rate on his income alone is less than it would be if it were combined with hers.
As to the OP, I’d say take the time to check out how much you’d have to pay for both ways for you to file, since it may make a sizeable difference to you.
*I am a chemist, not an accountant, so I make no guarantees that my understanding is correct.
Rarely are you better off filing separately, but it does happen. About 18 years ago, whenever they instituted income limits on when IRAs could be deductible, there was a loophole in which if we’d filed jointly, neither of us could have deducted it, but separately, we could. The net result was a little more money in our pockets, so we filed separately.
Another example I saw just in the last day or two: if one spouse has a lot of deductions (say, medical) that are subject to that 5% cutoff - if filing separately, the spouse might make the 5% cutoff, but if filing together, it wouldn’t be 5% of the combined income.
Some credits / deductions phase out when your income gets high enough - the child tax credit, and itemized deductions. If you file separately, it’s conceivable you would avoid some or all of that phaseout.
Another year long ago, we had some unexpected “vapor” income (from an inheritance) that caused us to owe a lot of Federal tax. Enough that it triggered a nastygram from the IRS saying we owed a penalty. We checked with an accountant friend, who looked at our returns for that year and the prior. He wrote a letter saying “Typo Knig’s income would have had zero taxable income the previous year had he filed separately. The income in question this year would therefore not have triggered a penalty. Therefore no penalty is due”. The IRS left us alone 
Had we filed separately that year, we likely would not have even gotten a letter.