Business & farm

Hello and good evening,  Washingtonianite!  

You asked,"What are the advantages and disadvantages of continuing to file jointly with her as a contract worker and business owner? Would we use the same form as before (1040?) if filing jointly? If I chose to file on my own, what form would I file with?"

What are the advantages of Married Filing Jointly?

Filing a joint tax return with your spouse offers many benefits.

• One significant advantage is that joint filers receive one of the largest standard deductions each year, enabling couples to deduct a substantial amount from their taxable income. ()$27,700 in 2023. and $29,200 in 2024)
• Both or none: If one spouse decides to itemize, the other cannot claim the Standard Deduction. For 2023, each spouse filing separately would have a Standard Deduction of $13,850 if they don't itemize.
• Shared deduction restrictions: When each spouse has paid toward the same deductible expense, like property taxes or mortgage interest, they must agree on how to split the deduction amount between their separate returns. The combined total deduction claimed should not exceed what would be allowable on a joint return.
• Couples who file jointly are able to qualify for more tax credits and deductions, including the Earned Income Tax Credit, American Opportunity and Lifetime Learning Education Tax Credits, Exclusion or credit for adoption expenses, and Child and Dependent Care Credit.

What about Married Filing Separately?

In contrast, couples who file separately often have fewer tax benefits and may owe more in taxes. For instance, separate tax returns may result in more tax since Married Filing Separately taxpayers typically receive a lower standard deduction.

• When one spouse earns most of the family income, the difference between filing jointly and separately can be significant. When filing jointly, the couple can use both spouse's standard deductions and take advantage of more favorable tax brackets.
• Separate filers are typically disqualified from several tax deductions and credits available to joint filers, including the student loan interest deduction. Separate filers usually get a smaller IRA contribution deduction, and the capital loss deduction limit is lower;$1,500 each when filing separately, vs $3,000 on a joint return.

Even though there are many benefits to joint filing, there are some cases where filing separately may be more advantageous, such as in the following  scenarios:

1. Medical expenses: If you or your spouse incurred significant out-of-pocket medical expenses, filing separately might help you surpass the IRS's threshold to deduct these costs. Since the threshold is based on a percentage of your Adjusted Gross Income (AGI), filing separately with only one income could lower your AGI.

2. Student loan payments: If your student loan repayment plan is based on your tax return's income, filing separately might help you manage your payments better.

3. Separated finances: In circumstances where couples prefer or need to keep their finances separate, such as during a divorce, filing separately can provide financial division. Additionally, filing separately can limit your liability for your spouse's tax matters.

If you are filing your taxes as a married couple, you have two options: Married Filing Jointly (MFJ) or Married Filing Separately (MFS). The forms you use would depend on which option you select.

If you choose Married Filing Separately, you can still use the same  Form 1040 that you used as a married filing joint couple, but you would need to indicate that you’re filing separately from your spouse in the filing status section at the top of page 1 of the 1040. Additionally each of you will need tto prepare a 1040 for yourself and will be required  to provide the  name and social security number of your other spouse on tye married filing separate return. 

For additional informatiuon please checj out these links:

Married Filing Jointly vs Separately: Which Should I Choose? 

When Married Filing Separately Will Save You Taxes - TurboTax 

How Should You and Your Spouse File Taxes? Married Filing Jointly vs Separately 

Please feel free to reach backout with any additional questions or concerns you might have.

Have an amazing rest of your day!

Terri Lynn, EA

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