Q. Must I file a new w2?
A. No. The school handles the paperwork automatically. Tuition remission is usually (almost always) tax free and not indicated on the W-2 (it may go on the 1098-T).
Q. Must we file joint to remain untaxed for the tuition remission?
A. No. The tax filing status you use is not affected by this, as far as the IRS is concerned. Whether your school has such a rule, you'll have to ask them. That would be unusual.
Q. Does she have to be my dependent?
A. No. Spouses are never dependents. But filing jointly gets you all the benefits of a dependent (and more).
Q. We prefer to be married/file separate but don't want to mess up the paperwork?
A. See second answer.
Why are you wanting to file separately?
Filing separately is seldom the best way to go and the decision to do so is usually based on erroneous information. Two suggestions: 1). do your taxes both ways and compare before you actually file and 2). ask a specific question, here in the TT forum, regarding your reason for filing separately to solicit advice. One of the biggest reasons for filing separately is that the student loan company may require separate filing to qualify for lower student loan payments. Even then, you should do the math to see if it’s worth losing the benefits of filing jointly.
If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you will usually pay more tax on a separate return than if you used another filing status that you qualify for.
1. Your tax rate generally will be higher than it would be on a joint return.
2. Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.
3. You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return). For more information about these expenses, the credit, and the exclusion see Pub 17, Chapter 32.
4. You cannot take the earned income credit.
5. You cannot take the exclusion or credit for adoption expenses in most cases.
6. You cannot take the education credits (the American Opportunity credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
7. You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
a. You cannot claim the credit for the elderly or the disabled,
b. You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
c. You cannot convert amounts from a traditional IRA into a Roth IRA.
9. The following deductions and credits are reduced at income levels that are half those for a joint return:
a. The child tax credit,
b. The retirement savings contributions credit,
c. Itemized deductions, and
d. The deduction for personal exemptions.
10. Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
You may not be able to deduct all or part of your contributions to a traditional IRA if you or your spouse were covered by an employee retirement plan at work during the year. Your deduction is reduced or eliminated if your income is more than a certain amount. This amount is much lower for married individuals who file separately and lived together at any time during the year.
If you actively participated in a passive rental real estate activity that produced a loss, you generally can deduct the loss from your non-passive income, up to $25,000. This is called a special allowance. However, married persons filing separate returns who lived together at any time during the year cannot claim this special allowance. Married persons filing separate returns who lived apart at all times during the year are each allowed a $12,500 maximum special allowance for losses from passive real estate activities.
If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Pub 555 Community Property - http://www.irs.gov/pub/irs-pdf/p555.pdf
Alaska, Florida, Kentucky, South Dakota, and Tennessee, have passed elective Community
Property Laws.
