Tax Tips Blog

One of the first items that you need to determine when completing your tax return is your filing status. Your correct filing status must be known in order to determine whether or not you need to file a return, when certain deductions, adjustments and credits phase-out and what tax bracket your income falls within.

Since we have a “voluntary” tax system, if more than one tax filing status happens to apply for your situation (which is common among certain taxpayers), you have the option to choose the filing status which will result in your lowest tax liability.

The hardest part of determining a taxpayer’s filing status is knowing the IRS definitions, as they pertain to filing status (the IRS has different definitions for the same words depending on what the item is that the word is referring to). The IRS follows state law when determining whether or not you are legally married. If you are legally married according to the laws of your state, on the last day of your tax year, then you and your spouse have a choice of filing as married filing jointly or married filing separately. The federal tax calculation for married filing separately varies by state and you should not attempt to complete a tax return with this filing status without the help of a tax professional. If you are not legally married, according to the laws of your state, on the last day of the tax year, then your filing status is most likely single, head of household or a qualifying widower. The exception is when your spouse passed away during the tax year and you did not remarry before the last day of the tax year. In this case, you may use the married filing jointly filing status for that year. If you are not legally married, according to the laws of your state, on the last day of the tax year, you have not been married for at least two years and you do not provide the support for another, then most likely you would be required to file as single. The single filing status usually applies to taxpayers who are unmarried, divorced or legally separated. If you are not legally married, according to the laws of your state, on the last day of the tax year and you paid more than half the cost of maintaining your home for yourself and your dependent child, parent or relative then you may be able to file as head of household. There are exceptions to this filing status that enable some taxpayers who are married to file as head of household and some taxpayers who pay for more than half of the cost to maintain their parents home to qualify for this filing status. Dependents for determining filing status is not defined the same way dependents are defined for exemption purposes. The costs of maintaining a home for your dependents (property taxes, repairs & maintenance, home owners insurance, etc.) is not the same as the cost of supporting your dependents (food, medical expenses, clothing, etc.). If you believe you may be able to qualify as head of household you should discuss this with your tax advisor to make sure you qualify. The year after your spouse died, assuming you filed married filing jointly in the year of your spouses death, you may be able to file as a qualifying widower for the next two tax years. You can usually use this filing status if you paid more than half the costs of maintaining a home for yourself and a dependent child who lived with you for the whole year.

In order to make sure you’re paying the least amount of tax required by law, make sure you take advantage of the best filing status that your can.

Deanna Dahm wrote: Gina, I found your blog and all sorts of usefull information on it. I was wondering if there was any tax advantage to getting married in December, or if it would be better to wait until January. Thanks, Deanna

My reponse:Deanna, Thanks for reading my blog. I’m glad you found useful information on it.

The only way to take advantage (assuming there is an advantage) of filing jointly is to be married by December 31. Most married couples pay less when they file jointly, but there are exceptions, so it is always best to consult with your tax professional when deciding if you should file Married Filing Jointly or Married Filing Separately.

You might want to take a look at a post a made a couple of days ago regarding the Marriage Penalty.

Congratulations and best of luck,

Gina

Marty wrote: Wondering if you can tell me how my lady friend and I may be impacted, Tax wise by getting married. We each make about $49,000.00 a year and I have a $17,000.00 military retirement. Thank you for any help or discussion on the subject Marty

My response:Hi Marty. Thanks for reading my blog.

It would be in your best interest to ask a local tax professional to help you estimate your taxes. If you’re concerned about the famous “marriage penalty”, you may be happy to know that the 2003 Tax Act wiped out a lot of the penalty for married couples with taxable income less than $123,700.

If a married couple’s combine income is greater than $123,700, then they may owe more if they file married filing jointly then if they filed married filing separately, but it depends on several factors, one of which is the taxpayer’s individual state law.

Most married couples pay less when they file jointly because filing separately can prevent you from being able to take several tax breaks regardless of your income. Some of these tax breaks include the Hope Scholarship and Lifetime Learning credits, Roth IRA conversions and the rental real estate loss allowance.

Congratulation on your pending marriage. I hope you enjoy many years of happiness together.