Why Is It Better To File Taxes Jointly? Learn The Several Benefits

Last Updated on March 10, 2024 by Amrita

Tax season can be a stressful time for many people and couples, especially when it comes to deciding whether it’s better to file taxes jointly or separately. Sometimes, filing separately seems like the easiest solution to have independence; Again, it appears that filing jointly may be the best way to save money. In this guide, I will discuss why it is better to file taxes jointly in detail.

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What Does Filing Jointly Mean?

Filing jointly means that a married couple files one return with both incomes and deductions combined. When filing jointly, both spouses must sign the tax return, even if only one spouse had income. This filing status allows the couple to receive a larger standard deduction and make use of other tax breaks that are not available when filing separately.

What Does Filing Separately Mean?

Filing separately means that each spouse files their own return and lists only their income and deductions. This option can be beneficial if you’re dealing with a large amount of debt, as filing separately prevents the IRS from taking any money from the spouse who didn’t incur the debt. However, one of the drawbacks to filing separately is that you can’t take advantage of the standard deduction or other tax breaks.

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Why Is It Better To File Taxes Jointly?

Jointly filing taxes with your spouse or partner can offer several benefits compared to filing separately. Here are some reasons why it may be better for you and your significant other to file jointly rather than separately:

1. Lower Tax Rates

When you file jointly, you may have access to lower tax rates compared to if you file as an individual. This is because the income brackets for married couples filing jointly are typically wider, meaning that a larger portion of your income can be taxed at lower rates.

2. Increased Deductions And Credits

Filing jointly can also allow you to take advantage of certain deductions and tax credits that may not be available when filing separately. For example, if one partner has significant medical expenses, they may be able to deduct these expenses on a joint return. Additionally, some tax credits, such as the Earned Income Tax Credit, are only available to married couples filing jointly.

3. Simplified Process

Filing jointly can often mean a simpler and less time-consuming tax preparation process. Instead of each partner having to gather their own income and deduction information, you can combine it all on one tax return. This can save you both time and stress during tax season.

4. Shared Responsibility

When filing jointly, both partners are equally responsible for the accuracy of the return and any resulting taxes owed. However, this also means that both individuals may be protected from certain penalties if errors or mistakes are made on the return. Filing separately can limit this protection and potentially leave one partner solely responsible for any issues that arise.

5. Potential Marriage Penalties

While filing jointly can offer lower tax rates and increased deductions, there are also cases where married couples may face a higher tax bill compared to two individuals filing separately. This is known as a “marriage penalty” and can occur if both partners have similar incomes, which can push them into a higher tax bracket when filing jointly. However, for most couples, the benefits of filing jointly typically outweigh any potential penalties.

6. More Efficient Use Of Tax Software

If you and your partner use tax preparation software, it may be more efficient to file jointly rather than separately. Many software programs are designed for joint filers and can automatically optimize your deductions and credits based on your combined income. This can save you time and potentially result in a higher tax return.

7. Legal Benefits

In some cases, filing jointly may be required for certain legal benefits, such as claiming spousal social security or receiving financial aid for college. Additionally, if one partner passes away, the surviving spouse will likely have an easier time handling their taxes if they filed jointly in previous years.

The Drawbacks Of File Taxes Jointly

When married couples decide to file their taxes jointly, they benefit from lower tax rates and higher standard deductions than if they filed separately.

However, filing jointly means that both spouses must agree on all aspects of the return including deductions, credits, income sources, and other items. If one spouse has any debts such as student loans that would be deducted from their refund if they filed separately, filing jointly may reduce the amount of their refund.

Additionally, if one spouse is self-employed and has tax deductions that are specific to that business, filing taxes separately might yield a larger refund than if they filed jointly. There can also be financial disadvantages to filing taxes jointly, especially for couples with significant income disparity.

Since both incomes are combined when filing joint returns, couples who have a large gap in earnings (like one partner making significantly more than the other) may find themselves pushed into higher tax brackets as a result of filing jointly instead of separately.

This could mean paying higher taxes overall than if each partner had filed on their own return due to having lower individual incomes. Even if one spouse has a lower income and is eligible for certain deductions or credits, he or she might not get the full benefit of them when filing jointly because of the higher combined income level.

Also, if either spouse has unpaid taxes or other debts, those debts will still need to be paid, even if the other spouse’s income is not counted.

Why Is It Better To File Taxes Separately?

##If You Have Heavy Medical Bills

One of the main reasons to file separately as a married couple is if you have hefty medical expenses. The IRS allows taxpayers to deduct medical expenses that exceed 7.5% of their Adjusted Gross Income (AGI). When filing jointly, this percentage applies to the combined AGI of both spouses.

However, when filing taxes separately each taxpayer can deduct medical bills above their individual AGI and thus receive more tax savings than when filing jointly. This could be especially beneficial if one spouse has disproportionately high medical bills or if they are self-employed in need of major health care coverage.

##If You’re In Different Income Brackets

Another benefit to filing taxes separately is being able to take advantage of different tax brackets. Depending on your income level, filing separately could save you more in taxes than filing jointly. If one spouse earns substantially more than the other, that person can be placed into a higher tax bracket if they file taxes separately.

This means the higher-earning spouse’s income would be taxed at a higher rate than when filing jointly. As long as both spouses are not pushed into the highest tax brackets, they will benefit from having each of their incomes taxed at different rates, potentially saving them thousands of dollars come Tax Day.

##If One Spouse Has Significant Deductions

Married couples who have significant deductions or credits might find more favorable results when filing separately rather than together. This could apply to individuals with high out-of-pocket medical expenses, those who recently refinanced their mortgage and paid points, or those with student loan interest deductions.

Filing separately can allow one spouse to take advantage of the credits or deductions available, while the other spouse does not have any of these extra expenses.

##If You Have To Pay Estimated Tax

If you plan on making estimated quarterly tax payments throughout the year to avoid a hefty bill come April 15th, it might be wise to consider filing taxes separately. When married couples file jointly, each spouse is liable for half of the total amount owed in taxes.

This means if one spouse does not pay their portion of the estimated taxes on time, both spouses are held responsible. Filing separate taxes allows each individual to be solely responsible for paying their amount on time.

##Limit The Liability For The Spouse’s Tax Errors

One major reason for filing separately is to limit the liability of any mistakes made by the other spouse. This can be especially important if one partner has a complex tax situation or a history of filing inaccuracies. When filing separately, each person is liable only for their own mistakes which limit the risk of incurring penalties and interest for the errors of their partner.

##You Are Struggling With Student Loan Payments

If you file your taxes jointly, the amount of money that you can earn before having to pay federal student loan payments could be much higher than if you were to file separately.

This is because your combined income for both of you will be taken into account in order to determine the amount of money that is required for repayment. Additionally, filing separate returns may potentially lower your overall tax burden since you’ll only pay taxes on your individual income.

##Divorce Or Separation

Generally, married couples must file a joint return for the year in which they are married. If a couple is going through a divorce or separation, filing separate returns can give them more control over their finances. This allows each person to avoid incurring responsibility for the other’s taxes and any tax debt associated with their former partner.

##You Want To Keep Your Finances Separate

Some couples prefer to keep their finances separate, whether it be due to past experiences or simply because of personal preference. Filing taxes separately allows you and your spouse to remain in control of individual incomes and better manage any disputes that may arise.

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The Bottom Line: Is It Better To File Taxes Jointly?

Ultimately, when it comes to deciding whether or not to file jointly or separately, it’s important to think about your individual circumstances and which option will benefit you the most. Depending on the credits and deductions available to you, filing jointly might be more advantageous than filing separately in some cases.

However, it’s important to consider all of the pros and cons associated with each option so you can make an informed decision that will help save you money in the long run.