At Gurdak Group, Ltd., we are continually contacted by married clients who inquire if they should file jointly or separately. If you were married as of December 31, 2016, then your two income tax filing options were married filing jointly and married filing separately.
Separate returns typically result in less favorable income tax results compared to joint returns. At the same time, it may be advantageous for other reasons to file separate returns. If one spouse uses questionable tax filing techniques, the other spouse might want to file separate returns so they are not held accountable for any incorrect information that is included on their spouses return. When marriages are on troubled ground, many couples choose to file separately to start dividing up their finances and to avoid potential tax issues that pop up years after the marriage is over.
As previously stated, joint tax returns result generally result in favorable tax results. The following are credits or deductions that are disallowed when married filing separate returns:
- Earned Income Credit
- Child and Dependent Care Expenses Credit
- Adoption Expenses Credit
- Education Credits such as the American Opportunity Credit
- Student Loan Interest Deduction
- The Exclusion of US Savings Bond Interest used for education expenses
In addition to these, there are other limitations and differences that negatively impact tax returns for married couples filing separately.
The best course of action is to discuss the issue with a CPA the specific advantages and disadvantages to your individual situation. At times, we will prepare tax returns using both the joint and separate filing options and discuss the differences with our clients so that they are able to make fully informed decisions. Give us a call at 847-827-8100 or check http://www.gurdakgroup.com if you’d like to discuss your situation in more detail.