Tax Help Joint vs Separate

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jehovasfitness
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Tax Help Joint vs Separate

Post by jehovasfitness »

Can anyone give some advice?

I use Turbo Tax each year and for the past 6 years the wife and I filed jointly since most often it's more beneficial.

This year, she makes almost 2x what I make and pretty sure we're in different tax brackets 15 vs 25, where if joint we would still be in the 25%

We itemize every year since we live in MD, high tax state.

I can of course take the time to run both scenarios through Turbo Tax, but that requires doing one then deleting all info and running it again.

Can anyone with experience suggest if we're likely to be benefited more this time around by doing separate returns with the above info?

FWIW my taxable wages were $45,XXX and hers were $95,XXX

We both have student loan interest, but seems w/joint file it's capped due our total income, likely not if separate.

We also have a lot in mortgage interest combined, so we'd still likely itemize even if separate return.
notmyhand
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Re: Tax Help Joint vs Separate

Post by notmyhand »

Married filing separately won't change your tax brackets. Rarely is there an advantage to filing as married filing separately. You also can't file as single. A marriage penalty does exist in 2017 (married bracket is not twice as large as a single bracket) that is largely done away with in the new tax plan.
soupcxan
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Re: Tax Help Joint vs Separate

Post by soupcxan »

[deleted]
Last edited by soupcxan on Fri Jan 26, 2018 12:51 pm, edited 1 time in total.
Topic Author
jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

soupcxan wrote: Fri Jan 26, 2018 12:46 pm
jehovasfitness wrote: Fri Jan 26, 2018 12:38 pm I can of course take the time to run both scenarios through Turbo Tax, but that requires doing one then deleting all info and running it again.
Comparing MFJ to MFS in TT does not require that.
Interesting, maybe I read an old article where one did. I'll look into that, thanks
muddgirl
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Re: Tax Help Joint vs Separate

Post by muddgirl »

You cannot deduct student loan interest if you file separate, along with a host of other restrictions.
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jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

notmyhand wrote: Fri Jan 26, 2018 12:43 pm Married filing separately won't change your tax brackets. Rarely is there an advantage to filing as married filing separately. You also can't file as single. A marriage penalty does exist in 2017 (married bracket is not twice as large as a single bracket) that is largely done away with in the new tax plan.
Really? Combined our income is in the 25% bracket, but separate my income would be in the 15 and hers the 25. Or am I mistaken?
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jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

muddgirl wrote: Fri Jan 26, 2018 12:48 pm You cannot deduct student loan interest if you file separate, along with a host of other restrictions.
excellent link. That's crazy, IMO, that you can't use the student loan interest, assuming you both have your own.
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CAsage
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Re: Tax Help Joint vs Separate

Post by CAsage »

There is an excellent free Tax Planning Excel tool by Glenn Reeves, mentioned on several other posts (which is where I found it). It is downloadable.... Not interview based, you directly enter the data (one Excel sheet per 1040 form). I found it much faster than interviews. In this case, the advantage to OP would be you could very quickly create three files (via copy), make one joint, and two with the distributed income and Schedule A deductions and MFS. He has forms for every year!

http://www.excel1040.com
Last edited by CAsage on Fri Jan 26, 2018 12:54 pm, edited 2 times in total.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
Topic Author
jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

CAsage wrote: Fri Jan 26, 2018 12:52 pm There is an excellent free Tax Planning Excel tool by Glenn Reeves, mentioned on several other posts (which is where I found it). It is downloadable.... This spreadsheet is exhaustive, and contains most 1040 forms. Not interview based, you directly enter the data (so, actually much faster than interviews...) In this case, the advantage to OP would be you could very quickly create three files (via copy), make one joint, and two with the distributed income and deductions and MFS. Note you are still limited in some way to $10k SALT since you are married.... I think.

http://www.excel1040.com
thanks, the $10k SALT limit is for 2018, I'm in the process of during our 2017 ;)

so for 2018 we will be going standard deduction thanks to the SALT cap :(
nolesrule
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Re: Tax Help Joint vs Separate

Post by nolesrule »

jehovasfitness wrote: Fri Jan 26, 2018 12:48 pm
notmyhand wrote: Fri Jan 26, 2018 12:43 pm Married filing separately won't change your tax brackets. Rarely is there an advantage to filing as married filing separately. You also can't file as single. A marriage penalty does exist in 2017 (married bracket is not twice as large as a single bracket) that is largely done away with in the new tax plan.
Really? Combined our income is in the 25% bracket, but separate my income would be in the 15 and hers the 25. Or am I mistaken?
When it comes to being married and taxes, there's not really a "combined" vs. "separate". The width of the brackets is more or less double when filing jointly.

So while you won't have any income in the 25% bracket, she would probably have more income in the 25% bracket. At best it'd be a wash. You'd pay less taxes and she'd pay more. But it's the total paid that matters.
Last edited by nolesrule on Fri Jan 26, 2018 1:01 pm, edited 1 time in total.
Topic Author
jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

nolesrule wrote: Fri Jan 26, 2018 1:00 pm
jehovasfitness wrote: Fri Jan 26, 2018 12:48 pm
notmyhand wrote: Fri Jan 26, 2018 12:43 pm Married filing separately won't change your tax brackets. Rarely is there an advantage to filing as married filing separately. You also can't file as single. A marriage penalty does exist in 2017 (married bracket is not twice as large as a single bracket) that is largely done away with in the new tax plan.
Really? Combined our income is in the 25% bracket, but separate my income would be in the 15 and hers the 25. Or am I mistaken?
The width of the brackets is more or less double when filing jointly.

So while you won't have any income in the 25% bracket, she would probably have more income in the 25% bracket. At best it'd be a wash. You'd pay less taxes and she'd pay more. But it's the total paid that matters.
Ahh yes, didn't think of it that way
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HueyLD
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Re: Tax Help Joint vs Separate

Post by HueyLD »

Turbotax has a special feature for you to compare MFJ vs. MFS. Here is the link.

https://ttlc.intuit.com/questions/28953 ... separately
Topic Author
jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

HueyLD wrote: Fri Jan 26, 2018 1:05 pm Turbotax has a special feature for you to compare MFJ vs. MFS. Here is the link.

https://ttlc.intuit.com/questions/28953 ... separately
thank you :) crap, need the software

"However, this doesn't give you the whole picture because it doesn't account for your state return. For a true "apples to apples" comparison, you'll need to prepare your returns both ways."
seawolf21
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Re: Tax Help Joint vs Separate

Post by seawolf21 »

jehovasfitness wrote: Fri Jan 26, 2018 1:09 pm
HueyLD wrote: Fri Jan 26, 2018 1:05 pm Turbotax has a special feature for you to compare MFJ vs. MFS. Here is the link.

https://ttlc.intuit.com/questions/28953 ... separately
thank you :) crap, need the software

"However, this doesn't give you the whole picture because it doesn't account for your state return. For a true "apples to apples" comparison, you'll need to prepare your returns both ways."
That is correct. It doesn’t do state returns.

I’ve been rolling up my sleeves and prepare three returns for 10+ years in TT; joint and 2 MFS. IME, if no kids, you may come out a little bit ahead with MFS. With kids, joint have been more beneficial holistically (fed/state).

It’s not that time consuming to prepare three returns with tax software. I wouldn’t go thru the exercise if manual preparation.
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jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

seawolf21 wrote: Fri Jan 26, 2018 1:54 pm
jehovasfitness wrote: Fri Jan 26, 2018 1:09 pm
HueyLD wrote: Fri Jan 26, 2018 1:05 pm Turbotax has a special feature for you to compare MFJ vs. MFS. Here is the link.

https://ttlc.intuit.com/questions/28953 ... separately
thank you :) crap, need the software

"However, this doesn't give you the whole picture because it doesn't account for your state return. For a true "apples to apples" comparison, you'll need to prepare your returns both ways."
That is correct. It doesn’t do state returns.

I’ve been rolling up my sleeves and prepare three returns for 10+ years in TT; joint and 2 MFS. IME, if no kids, you may come out a little bit ahead with MFS. With kids, joint have been more beneficial holistically (fed/state).

It’s not that time consuming to prepare three returns with tax software. I wouldn’t go thru the exercise if manual preparation.
Yeah, I'm thinking MFS since we have no kids will help us.

The thing that adds some time is I have a side business with write-offs, so that tends to add most of the time inputting into TT
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neurosphere
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Re: Tax Help Joint vs Separate

Post by neurosphere »

With desktop software, or online software which allows you to save under different names/files, it's fairly easy to do complete joint vs separate taxes.

-- Enter all information as if you are doing a joint return. Save.
-- Delete all information, forms, etc. which pertains to only one spouse, change the filing status. Save under a new name.
-- Go back to the joint file and delete all information pertaining to the other spouse. Save under name #3.

Done!

Well, not exactly. You'll have to play with standard and itemized deductions. Both spouses have to use the same method, so you'll want to choose the method which is best. Also, makes sure you understand how to divide income and deductions which may be joint, or in separate names. Also, in a community property state? There are special rules too for how to file separately. I've never needed to know those rules/states, so don't have them handy.
bikechuck
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Re: Tax Help Joint vs Separate

Post by bikechuck »

My wife and I live in Ohio and have used the married filing separately status for the past 20 years or so. It has not made much of a difference at all on our federal taxes but we have saved a bundle on state taxes as the joint filing credit is low in Ohio but the taxes are graduated.

Each year I prepare the returns both ways which is not so difficult with the generally excellent low cost tax software.that is readily available. We both retired in 2017 so it will be interesting to see if this changes in 2018 and beyond.
Topic Author
jehovasfitness
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Re: Tax Help Joint vs Separate

Post by jehovasfitness »

Welp, as suggested, MFJ worked out to a $1k advantage.
Ace1
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Re: Tax Help Joint vs Separate

Post by Ace1 »

Jehovasfitness
+1 to the suggestion from neurosphere as to the process.
But when you prepare the first joint return, open the what if worksheet, check the joint versus split box,
and see what the result is. What if sheet allows you to move the deductions around, splitting them in a way that is most beneficial, (Note that certain deductions must remain with each taxpayer, such as withheld taxes).

When you save the joint return and then save it with yourname and the third version with spousename,
the whatif will be there in each version for guidance.

Sidenote to bikechuck... I am a buckeye, too, and am familiar with how Ohio taxes benefit a separate return.
Separate returns in retirement have the potential to be more tax costly, since the social security threshholds disappear.
Also, be very wary of the impact of IRMAA when filing separate... the 2018 magi threshhold is just 85k to hit the max penalty.
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