2015 taxes...file jointly or separately?

julieanne912 · September 2015

Background: H and I just got married on 9/12/15. For this year, he will make in the $130,000 range (not sure where he'll end up because bonuses are based on billable hours and we're not done with the year yet). I will make 45-48k as a w2 employee (again not sure exactly how much as I switched jobs mid-year and receive some bonus income), plus about 10k in 1099 income. I can come up with a decent amount of writeoffs but will still owe some money for that. I have not paid quarterly taxes on the 1099 income, I also will not have any 1099 income next year. We own a house, but the mortgage and title is in his name only, it was purchased on 2/3/15.

So, my question is, should we file jointly or separately for 2015? I think we should file jointly, he thinks separately. Obviously when the time comes, we will consult with a tax professional who has our full picture, but am just looking for some basic info for now.

simplyelise · September 2015

I am not very knowledgeable on these things. I use Tax Act and file state by hand lol, so clearly we don't have the complexity you guys have.

I just thought there was one more piece of info others might need when responding. Do either of you have any student loans that you're paying on?

hoffse · September 2015

If you use turbotax or one of the other programs it will calculate it for you both ways and use whichever one is most tax-advantaged.

Unless you guys have a unique tax situation, nothing you described is out of the realm of one of those programs. I have a theory that turbo tax/HR block returns don't get audited as much as those prepared by an accountant, because they are automated. That's just a theory though, I have 0 proof.

Most of the time you want to file jointly, but there are a few things that might make you want to file separately.

The big reason to file separately is tax liability. You won't be liable for taxes generated by the other if you file separately. Sometimes that's important, and I have a few clients who have spouses that have been dragged into horrible tax messes because they filed jointly. No tax benefit in the world was worth the mess they are currently in.

Another reason is if one of you has a big medical deduction or some other deduction that uses an AGI floor to calculate it. For instance, I think medical excludes the first 10% of AGI (don't quote me on this, I am going off of memory here). When you file separately, your AGI will be separated, so that floor will be lower and you can deduct more of the cost, especially if virtually all of your medical costs are tied to one spouse. I know you mentioned your H has some medical expenses, and that might be why he wants to file separately.

But when you file separately you also lose some key things - for instance, you lose the student loan interest deduction. I'm guessing your H is a lawyer, and if he has law loans that can be a big deal, unless your joint income phases you out anyway (sorry, I can't recall how much you have to make to phase out). You lose the other education credits as well if that's relevant.

You also lose child tax credits and things like net capital losses.

The big one for me is you can lose the ability to contribute to a Roth IRA because the income limits are INSANELY low for married filing separately. If you contribute to a traditional IRA, you lose the ability to deduct it.

Finally, your tax rates are usually higher as married filing separately, unless you are in an extremely high tax bracket. But even in those cases, the most tax-advantaged thing to do is get divorced and start filing as two singles. I digress.

Anyway it depends on a whole host of factors. Like I said, turbotax, HR block, etc. will calculate it for you both ways based on all of the information you submit, and then it will suggest one way or the other. The vast majority of couples file jointly.

**Not legal/tax advice

julieanne912 · September 2015

hoffse said:

If you use turbotax or one of the other programs it will calculate it for you both ways and use whichever one is most tax-advantaged.

Unless you guys have a unique tax situation, nothing you described is out of the realm of one of those programs. I have a theory that turbo tax/HR block returns don't get audited as much as those prepared by an accountant, because they are automated. That's just a theory though, I have 0 proof.

Most of the time you want to file jointly, but there are a few things that might make you want to file separately.

The big reason to file separately is tax liability. You won't be liable for taxes generated by the other if you file separately. Sometimes that's important, and I have a few clients who have spouses that have been dragged into horrible tax messes because they filed jointly. No tax benefit in the world was worth the mess they are currently in.

Another reason is if one of you has a big medical deduction or some other deduction that uses an AGI floor to calculate it. For instance, I think medical excludes the first 10% of AGI (don't quote me on this, I am going off of memory here). When you file separately, your AGI will be separated, so that floor will be lower and you can deduct more of the cost, especially if virtually all of your medical costs are tied to one spouse. I know you mentioned your H has some medical expenses, and that might be why he wants to file separately.

But when you file separately you also lose some key things - for instance, you lose the student loan interest deduction. I'm guessing your H is a lawyer, and if he has law loans that can be a big deal, unless your joint income phases you out anyway (sorry, I can't recall how much you have to make to phase out). You lose the other education credits as well if that's relevant.

You also lose child tax credits and things like net capital losses.

The big one for me is you can lose the ability to contribute to a Roth IRA because the income limits are INSANELY low for married filing separately. If you contribute to a traditional IRA, you lose the ability to deduct it.

Finally, your tax rates are usually higher as married filing separately, unless you are in an extremely high tax bracket. But even in those cases, the most tax-advantaged thing to do is get divorced and start filing as two singles. I digress.

Anyway it depends on a whole host of factors. Like I said, turbotax, HR block, etc. will calculate it for you both ways based on all of the information you submit, and then it will suggest one way or the other. The vast majority of couples file jointly.

**Not legal/tax advice

Thank you! This is the kind of information I needed... some basics. We both always used a tax professional to file previously (myself because up until this year, I was 1099 and I don't dare attempt that on my own, and him because, well, I don't know, probably because he's kind of lazy haha). Playing around in Turbotax might be a way to get some additional information though, especially about how his medical expenses affect everything as that is a whole new world for me.

He's not a lawyer, he's an IT consultant, but we do both have student loans... mine are higher than his though (his income means he can pay them down faster). The SL interest deduction is one of my main deductions. I just looked it up and the limit for a single is 80k (MAGI), so I would receive it and he wouldn't, but for a married couple it's 160k MAGI, so it's questionable at that point if we would get it or not if we filed jointly. I feel like 160k is right on the edge of where we'd be after adjustments.

We don't have any IRAs just yet, that's on my goal list for next year. We both contribute to our company 401ks at whatever rate we get matched at.

Just with this info I'm now leaning more towards filing separately at least for 2015 since I do still have the 1099 income to deal with and having that student loan deduction is nice to have for me.

Sisugal · September 2015

Usually you come out better with a joint return.
IF you decide on filing separately, you need to know you must both use the same form itemize or no itemizing). You will also lose the ability to take some deductions if you file separately.
Your accountant/tax professional will give you the best advice.

hoffse · September 2015

You won't be able to take the student loan deduction at all if you file separately, even if your income would qualify you as a single filer. You can't file as single anymore since you're married.

Ah I just heard "billable hour" and assumed law, lol. This is my life.

160 MAGI is pretty high. You have to calculate AGI and then add back in certain deductions to get to MAGI. It's stupid, I know.

Don't be scared to try Turbotax or HR block. I've used both and like both. They are extremely intuitive, and they go through your return in a basic Q&A format. For example, "Did you get married in 2015?" You will answer yes, and then it will start asking you questions about you and your spouse. They also have a cool little tracker where you can see what you owe or what your refund is going to be, and it changes as you go through the whole thing. You can save your work and come back to it later if you get tired, and you can easily make edits if you make a mistake. It also saves employer (and other) info for future years if you continue to use the same program.

If nothing else, I think those programs are really valuable because you can learn a lot about what gets captured in your income taxes just by seeing what kind of questions they ask you. The more you know about that, the better you can plan in future years. You might not know why it is asking you certain things, but you'll start to remember the categories year after year, and then when something changes you might think to look it up.

Finally - and this is the last thing I'll say about it - I buy our program in December so I can do an estimate for that year's taxes. That way I have a couple weeks left to make a change (another donation, etc.) if I think our tax liability is going to be too high. It also gives us time to save for a potential tax bill when we have a solid ballpark estimate in December.

I will probably continue to use them up until one of us partners and suddenly we have to do payments with partnership returns and K-1s. That's when it gets very complicated and would be worth using an accountant.

julieanne912 · September 2015

hoffse said:

You won't be able to take the student loan deduction at all if you file separately, even if your income would qualify you as a single filer. You can't file as single anymore since you're married.

Ah I just heard "billable hour" and assumed law, lol. This is my life.

160 MAGI is pretty high. You have to calculate AGI and then add back in certain deductions to get to MAGI. It's stupid, I know.

Don't be scared to try Turbotax or HR block. I've used both and like both. They are extremely intuitive, and they go through your return in a basic Q&A format. For example, "Did you get married in 2015?" You will answer yes, and then it will start asking you questions about you and your spouse. They also have a cool little tracker where you can see what you owe or what your refund is going to be, and it changes as you go through the whole thing. You can save your work and come back to it later if you get tired, and you can easily make edits if you make a mistake. It also saves employer (and other) info for future years if you continue to use the same program.

If nothing else, I think those programs are really valuable because you can learn a lot about what gets captured in your income taxes just by seeing what kind of questions they ask you. The more you know about that, the better you can plan in future years. You might not know why it is asking you certain things, but you'll start to remember the categories year after year, and then when something changes you might think to look it up.

Finally - and this is the last thing I'll say about it - I buy our program in December so I can do an estimate for that year's taxes. That way I have a couple weeks left to make a change (another donation, etc.) if I think our tax liability is going to be too high. It also gives us time to save for a potential tax bill when we have a solid ballpark estimate in December.

I will probably continue to use them up until one of us partners and suddenly we have to do payments with partnership returns and K-1s. That's when it gets very complicated and would be worth using an accountant.

Hmm well that's annoying about the student loan interest. I think H and I need to have a chat about why he wants to file separately, and I think we need to sit down with an accountant to get the real story based on our situations. I think once I tell him he can lose out on some deductions that he otherwise could probably still use if we file jointly, he might change his tune. He's a little weird about money... his parents divorced while he was in high school and he feels like his dad got screwed financially. We don't have combined anything as of yet, so we're working through those issues.

julieanne912 · September 2015

Sisugal said:

Usually you come out better with a joint return.
IF you decide on filing separately, you need to know you must both use the same form itemize or no itemizing). You will also lose the ability to take some deductions if you file separately.
Your accountant/tax professional will give you the best advice.

Yes we both currently itemize so that's good at least.

vlagrl29 · September 2015

Our CPA told us that rarely do you get a better benefit filing separate but married. It's always better to file joint.

smerka · September 2015

You can use the 2014 software now to run some numbers. You won't have to pay. You could easily have them withhold some extra taxes to cover your 1099 income and/or increase your 401k contributions to lower your taxable income. It might be worth sitting down with someone now to run some numbers. They will be less rushed now than they are in tax season.

smerka · September 2015

How are you itemizing? Do you have a house too? Or big medical bills?

AprilZ81 · September 2015

Last year we ended up filing married - separate to save several hundred on our state taxes. Even after paying our CPA to prepare two sets of forms for federal, state and local taxes.

DH makes double what I do, we bought and sold a house, and DH has a side business so we have someone way smarter than us do our taxes.

Before we got married I used H&R Block/Turbo Tax and it was fine.

jtmh2012 · September 2015

julieanne912 said:

So, my question is, should we file jointly or separately for 2015? I think we should file jointly, he thinks separately. Obviously when the time comes, we will consult with a tax professional who has our full picture, but am just looking for some basic info for now.

I don't understand why you're trying to make this decision now if you're planning to hire a tax professional. You're paying this person for their expertise. Use it. Let them run the numbers and figure out which one saves you the most money.

julieanne912 · September 2015

jtmh2012 said:

julieanne912 said:

So, my question is, should we file jointly or separately for 2015? I think we should file jointly, he thinks separately. Obviously when the time comes, we will consult with a tax professional who has our full picture, but am just looking for some basic info for now.

I don't understand why you're trying to make this decision now if you're planning to hire a tax professional. You're paying this person for their expertise. Use it. Let them run the numbers and figure out which one saves you the most money.

Because I want to be able to sit down with H and talk about it somewhat knowledgeably before we go and sit down with the professional. It's good to know the basics before going into any kind of meeting with a professional in my opinion.

julieanne912 · September 2015

smerka said:

How are you itemizing? Do you have a house too? Or big medical bills?

Not sure what you mean by "how" we are itemizing? I mentioned above that we have a house that was purchased in Feb of this year, but it's only in H's name and he's the only one on the loan (my previous years' income as a 1099 was not helping in terms of a mortgage). He has some medical bills, I don't have any.

short+sassy · September 2015

I have a fairly complicated return, at least compared to the average person, and I was astounded at how awesome and easy Turbo Tax is. I have a regular W-2, over $20K in 1099 income, and rental income...with all kinds of write-offs for the last two.

For example, last year my rental income was for a duplex I also live in. The software program literally asked me for the total square footage of the house and then the square footage for my personal side and for the rental side. It then calculated out how much of my mortgage interest, property taxes, and insurances were for the rental side (and therefore could be subtracted as an expense). I was pretty blown away by that.

Not trying to steer you away from a professional if that is what you all are most comfortable with, but I'd suggest you look at what your accountant does this first year you're married and possibly just use Turbo Tax in subsequent years.

@hoffse, I've heard stories of couples, where both people are high income earners, who will live socially as if they are married, but not legally get married because it will cost them tens of thousands of extra dollars in taxes each year. Seems odd and unfair, but I won't even pretend that I understand tax laws and the whys and reasons behind them, lol.

hoffse · September 2015

short+sassy said:

I have a fairly complicated return, at least compared to the average person, and I was astounded at how awesome and easy Turbo Tax is. I have a regular W-2, over $20K in 1099 income, and rental income...with all kinds of write-offs for the last two.
For example, last year my rental income was for a duplex I also live in. The software program literally asked me for the total square footage of the house and then the square footage for my personal side and for the rental side. It then calculated out how much of my mortgage interest, property taxes, and insurances were for the rental side (and therefore could be subtracted as an expense). I was pretty blown away by that.
Not trying to steer you away from a professional if that is what you all are most comfortable with, but I'd suggest you look at what your accountant does this first year you're married and possibly just use Turbo Tax in subsequent years.
@hoffse, I've heard stories of couples, where both people are high income earners, who will live socially as if they are married, but not legally get married because it will cost them tens of thousands of extra dollars in taxes each year. Seems odd and unfair, but I won't even pretend that I understand tax laws and the whys and reasons behind them, lol.

Yup. I know a few of these as well. It has to do with the marginal tax brackets. For singles, the top bracket is anything over $413,201 for 2015. For married joint the top bracket is anything over $464,850.
Obviously that's a lot of money, but imagine if both spouses make $400,000. You can shelter a LOT of money if you are legally divorced and can file as two singles in that instance.
Many of the lower tax tiers have a similar effect between single and married. The more you both make, the bigger the marriage penalty gets.

short+sassy · September 2015

@hoffse, thanks for the excellent explanation! It's still a shame for folks in that situation, but at least now I understand where the big difference in taxes come from for dual high earners.

Wow! A marriage where EACH person earns over $400K/year is way out of my stratosphere, lol.

Erikan73 · September 2015

Our taxes are pretty simple so I do them myself. I do the seperately & jointly. So far we've been better off doing separate. I live in Ohio and there is something about the tax laws where that when we file seperate, we get a little less back on Federal, but we get more back from the State. In the end when you add the two together, it equals more then if we did joint.

smerka · September 2015

julieanne912 said:

smerka said:

How are you itemizing? Do you have a house too? Or big medical bills?

Not sure what you mean by "how" we are itemizing? I mentioned above that we have a house that was purchased in Feb of this year, but it's only in H's name and he's the only one on the loan (my previous years' income as a 1099 was not helping in terms of a mortgage). He has some medical bills, I don't have any.

You said above that you both itemize. What are you itemizing? Based on what you've said, you (filing by yourself) don't have enough deductions to exceed the standard deduction. Things that you can itemize include state income taxes, mortgage interest, property taxes, charitable donations, medical expenses (in excess of 10% of your AGI), job related expenses (in excess of 2% of your AGI).

julieanne912 · September 2015

smerka said:

julieanne912 said:

smerka said:

How are you itemizing? Do you have a house too? Or big medical bills?

Not sure what you mean by "how" we are itemizing? I mentioned above that we have a house that was purchased in Feb of this year, but it's only in H's name and he's the only one on the loan (my previous years' income as a 1099 was not helping in terms of a mortgage). He has some medical bills, I don't have any.

You said above that you both itemize. What are you itemizing? Based on what you've said, you (filing by yourself) don't have enough deductions to exceed the standard deduction. Things that you can itemize include state income taxes, mortgage interest, property taxes, charitable donations, medical expenses (in excess of 10% of your AGI), job related expenses (in excess of 2% of your AGI).

Oh, I see. Prior to this year I was always a 1099 so I had lots of deductions plus I always exceeded the maximum for the student loan interest deduction. This year I may not hit the standard deduction, not sure yet as I haven't sat down to add up my expenses that related to the smaller 1099 income I have (it's from side work versus full time so it's different than before). He could itemize stuff like mortgage interest, property taxes, state income taxes, probably medical expenses, and perhaps even some job related expenses since he travels extensively, although most of it is reimbursed.

smerka · September 2015

When you have a 1099, you aren't deducting things ( well except that you subtract). You have expenses that offset your income. Tax professionals see expenses and deductions as very different things. I'm not telling you that to be a bitch. If and when you sit down with a tax pro, that difference will be important.

short+sassy · September 2015

smerka said:

When you have a 1099, you aren't deducting things ( well except that you subtract). You have expenses that offset your income. Tax professionals see expenses and deductions as very different things. I'm not telling you that to be a bitch. If and when you sit down with a tax pro, that difference will be important.

That's a good point and distinction. Before I bought a house, I always did a standard deduction, but could absolutely deduct my expenses from my 1099 income. They are two different beasties.

hoffse · September 2015

smerka said:

When you have a 1099, you aren't deducting things ( well except that you subtract). You have expenses that offset your income. Tax professionals see expenses and deductions as very different things. I'm not telling you that to be a bitch. If and when you sit down with a tax pro, that difference will be important.

Yes and no. Both are technically called deductions, but one is above the line and the other is below the line. When you hear the word "deduction" most people are talking about things that happen below the line (charitable, medical, mortgage interest, even the standard deduction is below the line). The "line" is your AGI. Self-employment expenses, however, are usually deducted above the line on Schedule C. You often hear it called "expensing" (that's what I call it), but functionally it's a deduction in that it's offsetting income, rather than offsetting tax owed.

Still, the distinction between above the line and below the line is super important because lots of below the line deductions have income phase-outs based on your AGI, or they have AGI floors. So if you can lower your AGI by expensing something above the line, it might enable you to take a below the line deduction you otherwise wouldn't qualify for.

Also, above the line deductions are things you can take whether you itemize or not.

2015 taxes...file jointly or separately?

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