Author Topic: Switch from Married Filing Jointly to Married Filing Separately  (Read 8011 times)

drtownhouse

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Hello,

My wife and I are considering filing separately. We would like to know what benefits we might lose as a result.

AGI: approx $98,000 (me: $68,000; her: $30,000)
Filing jointly taxable income: approx $69,000

Deductions
-$7,000 for state and local income taxes
-$3,000 in real estate taxes
-$7,000 in mortgage interest

Exemptions
-$11,850 (wife, kid, me)

Credits
-$600 credit for child care expenses
-$1,700 education credit (wife school)
-$1,000 child tax credit.

These are pretty much everything that reduced our tax liability. I don't see why we would lose any of this filing separately. I found a TurboTax link that said we'd lose the child tax credit. However, another link said you can still get the credit if filing separately and your AGI is < $55,000.

My wife's AGI is under $55,000, so it seems she could claim my son as an exemption and get the child tax credit and credit for child care. I don't see why she would lose her education credit if she filed separately.

So we should be able to get the $11,850 in exemptions. Wife should cover the credits. I pay the real estate taxes and mortgage, and I don't see why filing separately or jointly would affect that. Same for state versus local taxes.

Am I missing something? I don't see that we would take any major hit from filing separately. The brackets are not as favorable, but if I kept my deductions, my AGI would be in the low 50s.

Anyway, I'm blabbing now. To summarize:

A) Is there any reason to believe we would lose any of the above deductions?
B) Is there any reason to believe we wouldn't get our 3 exemptions?
C) Is there any reason to believe we wouldn't get the same tax credits?
D) Are the less favorable brackets pretty much the only thing that would hurt us?

Thank you!

forummm

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #1 on: July 11, 2015, 03:14:38 PM »
The best way to figure this out is to just fill out the tax forms both ways and see what happens.

Rural

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #2 on: July 11, 2015, 08:22:24 PM »
You both have to itemize if one of you itemizes, so you have to each have more than th standard deduction or you lose out. But yes, try both ways (Taxact will do this for you) and see.

johnny847

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #3 on: July 11, 2015, 09:17:18 PM »
The best way to figure this out is to just fill out the tax forms both ways and see what happens.

+1
There really is no substitute for this.

drtownhouse

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #4 on: July 11, 2015, 10:16:47 PM »
The best way to figure this out is to just fill out the tax forms both ways and see what happens.

+1
There really is no substitute for this.

I've tried doing this - essentially I wanted to do an apples to apples comparison using 2014 data. I tried running the numbers from our W2 through a simulator and noticed the state/local taxes on our W2s didn't even add up to what was in our 2014 return.

I'll keep playing with that and researching. Thought someone might know.

johnny847

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #5 on: July 12, 2015, 04:44:13 AM »
The best way to figure this out is to just fill out the tax forms both ways and see what happens.

+1
There really is no substitute for this.

I've tried doing this - essentially I wanted to do an apples to apples comparison using 2014 data. I tried running the numbers from our W2 through a simulator and noticed the state/local taxes on our W2s didn't even add up to what was in our 2014 return.

I'll keep playing with that and researching. Thought someone might know.

Well of course they didn't. The W2 shows how much tax was withheld, not how much you owed . Then you file your tax returns to calculate your true tax liability and (for most people) you get a refund.

forummm

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #6 on: July 12, 2015, 07:08:42 AM »
Generally, when the 2 incomes are quite different from each other, you are better off filing jointly. Similarly with high itemized deductions. But you have to run it both ways to know for sure in your case.

Fun tool to illustrate this:
http://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html

foobar

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #7 on: July 13, 2015, 10:56:21 AM »

My wife's AGI is under $55,000, so it seems she could claim my son as an exemption and get the child tax credit and credit for child care. I don't see why she would lose her education credit if she filed separately.



You are not allow AOTC or the life time learning credit no matter what your income if you file seperately.

You are well in the marriage bonus range. There are very few cases where you will come out ahead by filing seperately.

johnny847

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #8 on: July 13, 2015, 11:21:25 AM »

My wife's AGI is under $55,000, so it seems she could claim my son as an exemption and get the child tax credit and credit for child care. I don't see why she would lose her education credit if she filed separately.



You are not allow AOTC or the life time learning credit no matter what your income if you file seperately.

You are well in the marriage bonus range. There are very few cases where you will come out ahead by filing seperately.

How the hell you managed to attribute that quote to me instead of the OP escapes me. I didn't even quote that part of the OP.

Thegoblinchief

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #9 on: July 14, 2015, 06:31:31 AM »
The best way to figure this out is to just fill out the tax forms both ways and see what happens.

+1
There really is no substitute for this.

And it's usually not even that hard. I use TaxAct. My taxes are relatively simple, so the comparison only adds about 5 minutes or so. Even with more complicated taxes, a good piece of software (or preparer) should do the comparison quite easily.

Our case is so clearly MFJ that for the past few tax years I haven't even bothered to spend the 5 minutes, but it's not hard at all to spend the time. You could even reopen last year's return, play around with the numbers, and get a good idea of what to expect for 2015.

Merrie

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #10 on: July 14, 2015, 05:48:44 PM »
Any deduction for student loan interest? You would lose that.

Is there some reason you want to file MFS apart from potentially saving money?

Do you contribute to Roths? Can't do that if you want to file MFS.

As others have said, try it both ways and see which works better.

Cheddar Stacker

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #11 on: July 20, 2015, 08:59:35 PM »
There are very few cases where you will come out ahead by filing seperately.

I agree, but I've had a lot of clients try. For some it was a wash, but they said it was better for the IBR calculation on their student loans. Ironically though, they can't deduct that interest from the very same student loans.

I can recall one case where MFS was substantially better. Dual income, one around $75k and other around $135k. 3 kids. The reason MFS was better was AMT on the MFJ, which denied all state W/H and exemptions for the 3 kids. Under MFS, they didn't reach the AMT threshold.

MFS seems to make some sense when you have 2 similarly high incomes, and you get into AMT situations.

MDM

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #12 on: July 20, 2015, 09:10:05 PM »
I've tried doing this - essentially I wanted to do an apples to apples comparison using 2014 data. I tried running the numbers from our...2014 return [through TaxAct or TurboTax or similar].

Edited the post to show what you might want to do.  How were your 2014 taxes done?  E.g., by CPA, or by you by hand, or by you by program, etc.?

pdean

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #13 on: February 13, 2016, 08:58:40 AM »
MFS seems to make some sense when you have 2 similarly high incomes, and you get into AMT situations.

Because it's a little more difficult to run another return with TT online, I just want to ask: what about us? Wife is teacher, one income, lots of withholding; I'm freelance, half her income, lots of business deductions (home office, travel). I also paid health-insurance premiums and have medical bills that probably will hit the threshold. We itemize everything (mortgage, charities) under TT.

Thanks for any input!

MDM

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #14 on: February 13, 2016, 10:01:44 AM »
Because it's a little more difficult to run another return with TT online, I just want to ask: what about us? Wife is teacher, one income, lots of withholding; I'm freelance, half her income, lots of business deductions (home office, travel). I also paid health-insurance premiums and have medical bills that probably will hit the threshold. We itemize everything (mortgage, charities) under TT.
Not familiar with TT online, but TT download used to do the MFJ vs. MFS comparison for you.  I believe - but don't know for sure - the other major players (TaxAct, H&R Block, TaxSlayer, ...) provide this function.

A little googling found this: https://ttlc.intuit.com/questions/2895312-how-can-we-compare-married-filing-jointly-with-married-filing-separately.

pdean

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #15 on: February 13, 2016, 10:11:22 AM »
Thanks, I had seen that. I'm not sure, when one creates a test account, whether the info from my joint return (which I've done) can be transferred, or whether I have to enter everything all over again.

Hence my avoidance/laziness.

maizefolk

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #16 on: February 13, 2016, 05:27:14 PM »
There are very few cases where you will come out ahead by filing seperately.

I agree, but I've had a lot of clients try. For some it was a wash, but they said it was better for the IBR calculation on their student loans. Ironically though, they can't deduct that interest from the very same student loans.

I can recall one case where MFS was substantially better. Dual income, one around $75k and other around $135k. 3 kids. The reason MFS was better was AMT on the MFJ, which denied all state W/H and exemptions for the 3 kids. Under MFS, they didn't reach the AMT threshold.

MFS seems to make some sense when you have 2 similarly high incomes, and you get into AMT situations.

I always wondered if there was any case (other than being separated or trying to game things like student loans that depend on income reported on tax returns) where MFS would make sense. Now I know AMT can make it happen. Thanks!

Merrie

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Re: Switch from Married Filing Jointly to Married Filing Separately
« Reply #17 on: February 15, 2016, 08:04:44 PM »
There are very few cases where you will come out ahead by filing seperately.

I agree, but I've had a lot of clients try. For some it was a wash, but they said it was better for the IBR calculation on their student loans. Ironically though, they can't deduct that interest from the very same student loans.

I can recall one case where MFS was substantially better. Dual income, one around $75k and other around $135k. 3 kids. The reason MFS was better was AMT on the MFJ, which denied all state W/H and exemptions for the 3 kids. Under MFS, they didn't reach the AMT threshold.

MFS seems to make some sense when you have 2 similarly high incomes, and you get into AMT situations.

Our accountant previously was trying to get us set up to do MFS, a few years ago. We were futzing around with a backdoor Roth in preparation for that. Jointly we made about $110k or so and I was the higher earner by a bit. The theory was that we were on the verge of losing our child tax credit, but if we filed separately we could claim her on my husband's return and still get the credit. Though we would have lost the deductions for student loan interest so it probably would have been a wash. We never ended up actually doing it and I can't remember why now, maybe because we didn't hit that phaseout threshold. Now I'm the breadwinner and my husband stays home, so it would be pointless to not file jointly.

 

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