Legal Blog

The Weekly Scenario: Filing Taxes as a Married Couple

Question:  (for my readers as we get closer to April 15):  Is it generally better to file married filing joint (MFJ) or married filing separate (MFS)? Answer: Married couples have the option of filing as MFJ or MFS.  Most of the time, spouses will determine filing status that results in the lowest combined tax liability, which generally is MFJ. Why? MFJ status allows an averaging effect of combining two incomes which brings a portion of the income out of a potentially higher bracket.  So if a spouse has $100,000 of taxable income and the other spouse has $20,000, less tax is owed (all things equal) if the couple files MFJ by over $2,000. If you file MFS, the rates you use are the MFS rates (not single rates). Such rates are equal to one-half of the MFJ backets (which is a worse deal than single rates). Moreover, there are certain credits that are not available to individuals who file as MFS:

  • Child and Dependent Care Credit;
  • Adoption Expense Credit;
  • American Opportunity Tax Credit;
  • Lifetime Learning Credit ;
  • Credit for the Elderly or the Disabled (unless you and your spouse lived apart for the entire year);
  • Qualified Education Loan Interest Deduction

Comment: It is possible that MFS status can result in tax savings to a married couple. If one spouse has a significant amount of medical deductions, for example, a spouse with a lower amount of income might have a better chance of deducting the expenses by allowing a larger portion of them without AGI phase out If you have any questions or would like more information please contact Steve Shane at: sshane@offitkurman.com | 301.575.0313.

ABOUT STEVE SHANE

Steve Shane Head Shot for webSteve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can also connect with Offit Kurman via FacebookTwitterGoogle+YouTube, and LinkedIn. WASHINGTON | BALTIMORE | FREDERICK | PHILADELPHIA | WILMINGTON | VIRGINIA