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The recently enacted Tax Cuts and Jobs Act has made some significant changes that pose several new tax planning considerations. As a result, many married couples are reevaluating how they prepare their documents. Spouses may file jointly or separately, and while it’s common to assume that a joint filing is beneficial, there are certain times when separate filings can make more sense. Both options have their advantages and drawbacks, so your choice must be based on what’s best for your particular situation. Here’s an overview of what you need to know to decide.

Joint Filing 

The IRS provides spouses filing jointly with a variety of tax breaks, such as the Earned Income Credit, Child and Dependent Care Credit, Lifetime Learning Education Credit, student loan interest deduction, and adoption expense credit. Married couples are also given a much higher standard deduction than those filing separately.

The biggest disadvantage of joint filings is that each spouse becomes liable for any questionable tax practices the other is engaged in. This means both would be responsible for any tax obligations, penalties, and fines incurred from a joint return.

Separate Filing 

One spouse may decide that independent tax planning is best if they want protection from their partner’s tax liabilities. Filing separately also allows working spouses to avoid ending up in a higher tax bracket due to their combined earnings.

tax planningAdditionally, if one spouse has enough deductible medical expenses to exceed 10% of their adjusted gross income, separate tax returns may equate to bigger savings. This threshold can be difficult to meet when filing jointly. 

 

When it comes to tax planning, it pays to do it right with the guidance of a professional accounting firm like Wilson, Rea, Beckel & Associates, CPAs, LLC. They’ll determine which filing status is most suitable for you and your spouse and ensure your returns are accurately prepared. Their team stays updated on all the current tax laws and has years of experience helping residents in Pagosa Springs, CO, and the surrounding areas maximize deductions for a higher refund. Call (970) 731-1040 to schedule an appointment. Visit them online for more information on the tax planning services they offer.

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