When you get married, you are not only combining homes but possibly tax returns, as well. Will getting married save you money on your taxes, or will you end up being penalized with a tax bill for your nuptials? Here are steps to follow to earn the lowest possible taxes as a married.
Can You File as a Married Couple?
If you aren’t married on the last day of the tax year you are to file, you have to option, either file as married filing individually or married filing jointly. In most cases, the couple declares as single individually. Simply this means if you get hitched on January 1, 2016, for the year ending 2015 you can’t declare married on your tax returns.
Review Restrictions on Married Filing Separately
There two limits on filing tax returns separately that automatically end the discussions about these options or have you think harder about the tax option to submit with.
- Prohibited Deductions and Credits
when you file as married filed individually, the law can’t let you claim student loan interest deductions, tuition & fees deduction, the education credits, and earned income credits. You will lose any credit and deductions you qualify for, a lose ending up to $1,000+ of your tax refund by filing individually.
Also, you both have to choose to take the standard deduction or itemized deductions. In the end if you need to know more you can click this link:http://www.seemarylandhomes.com/will-get-income-tax-refund-faster/ here. Meaning it’s only one of you who has enough deductions to file an enormous amount of tax deductions business or medical expenses and does the same.
Living in a Community Property State
Residing in a community property state say Arizona, California, Idaho, Louisiana, Nevada, New, Mexico, Texas, Washington or Wisconsin, they have a whole set of complicated rules defining what is considered marital or community income and what the law your income. These rules vary by state. The spouse income may be divided equally between the tax returns, negating the purpose of filling separately. If you plan to submit married filing separately, it’s advisable to use tax software or hire a tax expert.
Discuss All Possible Tax Liens
The main reason married couples choose to file separately is they have earlier debt (past due child support, student loan, or tax liability incurred before marriage) that is past due deducted from their taxes. Filing separately, for this reason, make sense, and IRS allow, injured spouse allocation filed each year with the married filing jointly tax return until the spouse gets caught up on individual debt.
This is not only beneficial to the spouse whose tax obligation is up to date not penalized for their spouse returns, but also deductions and credits not existing to those filing separately and can still be declared.
Considering the Income Factor
In most cases one spouse makes more than the other, their marginal tax rates could be the best wedding present for either.
For instance, let’s say Cate and Joseph get married on December 27, 2015. Cate is a marketing manager whose taxable income in 2015 was $55,000. Joseph just completed his MBA on December 15, 2015, and had taxable income from his fellowship of $8,000. Without her soul mate, Joseph, Cate would pay 25% of her taxable income above $36,250; now she pays 15% of that amount, and they claim the deductions and credits that would be prohibited for married filing jointly.
Do you have all document needed for filings?
Filing married filing jointly or separately, you need to have all documents ready for optimal deductions. After reading this visit this website for more details. The largest tax money waster is not filing for deductions and credits entitled. As couples make sure your partner has all documents in order.
Prepare Two Sets of Tax Returns Required A Tax Expert/Accountant
Choose to file with the option with lower taxes. If you make your taxes on software, it will take you an extra couple of hours to do this, versus just filling the way you think is best. However, doing this at least once will help you decide how you will want to file in future years.
If you file married filing separately, it’s a more complicated tax process and more if you live in a community property state. You are more likely to lose out on the main deductions and credits. Unless you try both ways, you never know which is best for filing, thus go through filling out forms and submitting the way that works best. Moreover, since one of the biggest reasons couples fight is money, the large tax refunds is the best couple’s present the IRS could give you. For further reading, check out our blogs taxreturnco.com.au.