Author Topic: First time filing "married" taxes- jointly or separately?  (Read 5699 times)

Miss Growing Green

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First time filing "married" taxes- jointly or separately?
« on: February 12, 2014, 12:07:05 PM »
I always opt to do our own taxes, but I want to make sure I'm maximizing all the tips and tricks possible now that we'll be filing as married for the first time.  Specifically, I'm trying to decide if we should file jointly or separately.

Considerations and questions:
We have massive amounts of deductions, so I think we will be in the 15% tax bracket whether we file jointly or separately

I quit my 9-5 job in 2012 so my reported income for the year is much lower than usual.  Could we file separately and I can claim our medical expenses on my return (they will be more than 7.5% of my AGI)?  Can I claim all the expenses or just my own (probably a silly question)?

I have a rental property in my name, so my husband couldn't claim the rental deductions on his tax return if we filed separately, could he?  What if the rental were in both our names (thinking for the future)?  Would the deed need to be in both our names, the mortgage, or both?

If we file separately can we each claim a portion of the mortgage interest we paid on our primary residence or does one person have to claim it all?

We have investments through Prosper and Lending Club and they are in my name, but tied to our join bank account.  Can either of us claim that interest income or just me?

Thanks for all the help!  Any other tips, tricks, considerations that you know of to save us some money at tax time would be very much appreciated!

Cheddar Stacker

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Re: First time filing "married" taxes- jointly or separately?
« Reply #1 on: February 12, 2014, 12:20:30 PM »
Agree with Maigahane - MFS can really screw with some of your deductions. You have to look at all the facts to decide which way is better, but 95% of the time MFJ wins out.

Medical expenses - you can only claim your own.

Rental property - The big expenses tend to be mortgage interest and depreciation. The mortgage interest will be reported on a form 1098, which will have a name and social security number (or FEIN) on it. This is really who should be claiming the interest deduction to avoid IRS notices, so this is who should really be claiming all rental income and expenses. I think you have some flexibility, but it would be smart to change the deed and mortgage if your husband were to claim this activity.

You can claim a portion of the mortgage interest, but you might get tax notices from the IRS a year later. They're called CP-2000 notices. They have a system that matches your SSN reported on all forms to what you reported on your 1040. If it turns up different, they send a notice. You then just have to respond to the notice explaining your reasoning, and maybe provide some documentation.

Lending Club - Again, this will be tied to your SSN. Open an account in your Husband's name/SSN if you need him to claim it.

With MFS, you have to both claim itemized deductions, or both claim the standard deductions, you can't do one of each. You can't claim any student loan interest. You lose out on some other things, but it really comes down to all the factors in your return. Chances are, it's not worth your time to split it all up, but you don't know unless you try.

Numbers Man

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Re: First time filing "married" taxes- jointly or separately?
« Reply #2 on: February 12, 2014, 12:37:16 PM »
MFJ - Don't over think.

seattlecyclone

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Re: First time filing "married" taxes- jointly or separately?
« Reply #3 on: February 12, 2014, 01:14:16 PM »
You can always try filling out the forms both ways, but the vast majority of couples are better off filing jointly.

MustachianAccountant

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Re: First time filing "married" taxes- jointly or separately?
« Reply #4 on: February 13, 2014, 09:09:43 AM »
Agree with all of the above.
Sometimes your software will have a way to compare MFS and MFJ, might want to check that out.

netskyblue

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Re: First time filing "married" taxes- jointly or separately?
« Reply #5 on: February 13, 2014, 10:47:34 AM »
Off-tangent - why does your marital status matter for tax filing?  Why do they even need to know?

desrever

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Re: First time filing "married" taxes- jointly or separately?
« Reply #6 on: February 13, 2014, 11:39:00 AM »
Off-tangent - why does your marital status matter for tax filing?  Why do they even need to know?

As with all things legal: because the statute says so. A married couple is taxed as a single entity in the US. You pay taxes on your combined income, according to a different tax curve. Depending on your situation you will pay more or less taxes once you're married.

Is MFS ever a win? From what I can tell, the math wouldn't seem to ever favor it.

MissPeach

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Re: First time filing "married" taxes- jointly or separately?
« Reply #7 on: February 13, 2014, 11:45:22 AM »
I think most of your questions were answered but MFJ is usually better. The medical expenses won't really help you if it's not more than the standard deduction.

Cheddar Stacker

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Re: First time filing "married" taxes- jointly or separately?
« Reply #8 on: February 13, 2014, 12:22:22 PM »
Is MFS ever a win? From what I can tell, the math wouldn't seem to ever favor it.
Supposedly there are occasional circumstances where it is, but very few and far between. This is most often used when a married couple is separated but not officially divorced yet and can't reconcile enough to get together to file one last tax return

I've seen it used as a strategy to avoid higher monthly payments on income based student loan repayment plans, although I'm not sure it actually did any good.

It's rare that MFS makes your return more favorable, but it does happen sometimes. Our software automatically calculates the return both MFS and MFJ, but as anything like this goes it's garbage in garbage out. Unless you pay very close attention to who the income/deduction is really attributable to and enter it into the software appropriately, you'll never get a good result.

Miss Growing Green

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Re: First time filing "married" taxes- jointly or separately?
« Reply #9 on: February 13, 2014, 12:40:15 PM »
Thanks for the info guys!
I think you're right- MFJ will be our best bet.  My medical expenses exceed 7.5%, but not 10% of my AGI, which would be the main benefit of MFS.  The other penalties for MFS don't really apply to us- we have about $200/yr in student loan interest, but the medical deduction (if I could have taken it), would have trumped that.

MFJ it is!