Social security

[Djarvis99]

My wife and I file separately because she has property and doesn't want me to be responsible for any of that debt. This year, I have two incomes, one SS and the other is a state refund from last year. Even with a deduction for property taxes, my federal tax liability is currently at $678. I don't understand why, if SS is supposed to be nontaxed. Can someone explain what's going on?

[VolvoGirl]

Sorry,  Up to 85% of Social Security becomes taxable when all your other income plus 1/2 your social security, reaches:

Married Filing Jointly: $32,000

Single or head of household: $25,000

Married Filing Separately: 0

So by filing Separately your SS can be taxable with no other income.  It might be better to file Joint.  

It is usually better to file Joint. Joint has the lowest tax rates and the highest Standard Deduction. And if you are in a Community Property state MFS gets tricky to figure out. Here's some things to consider about filing separately……

In the first place you each have to file a separate return, so that's two returns. And if you are using the Online version that means using 2 accounts and paying the fees twice.

Many people think they come out better when filing Married Filing Separate but they are probably doing it wrong. If one person itemizes deductions then the other one must itemize too, even if it's less than the standard deduction, even if it is ZERO!

And there are several credits you can't take when filing separately, like the

EITC Earned Income Tax Credit

Child Care Credit

Educational Deductions and Credits

And contributions to IRA and ROTH IRA are limited when you file MFS.

[Djarvis99]

Thank you

[SweetieJean]

If you live in a Community Property State, Married Separately requires special calculations.  In any case, you and your spouse might wish to consult an attorney to evaluate others ways to address her concerns.