Wife disabled on SSA Disability and received a large back payment. Husband still works FT

[Grande]

My wife received a large back pay in 2024 after she qualified for SSA Disability. I still work FT and make a 6 figure salary. Filing married jointly calculates to us owing a five-figure tax bill. It appears that there may be a benefit in this case to filing married but separate. If we file married but separate for 2024 do I need to include my income in calculating her taxable benefit using the Social Security income worksheet? Or, is it as simple as my income my tax return, and her SSA income, her tax return?   

[xmasbaby0]

If you file separate returns MORE of your wife's SS will be taxable.

But-----try MFJ and MFS returns to see how they come out.  

It is not easy to compare MFJ to MFS using online TT but you can do it.  Since you only get one return for each account and user ID, you have to use 3 accounts and user ID’s—one for MFJ and two for each of the MFS returns.  Compare, choose, and file—and pay—accordingly.

It is much easier to do this comparison using the desktop version of TT installed from a CD or downloaded to your own computer.  You pay once for the software and you can prepare multiple returns easily, and it has a “what if” feature that allows comparisons.

WHAT IF…?

If you are using Desktop software:

• With your return open, click Forms in the upper-right-hand corner
• Click Open Form
• In the Search area, type the word what. You should see the What If Worksheet listed, click to open it.

If you were legally married at the end of 2024 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $29,200 (+ $1550 for each spouse 65 or older)  for 2024. You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit. 

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return.

 Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

 If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice since with online, you get one return per fee.

https://turbotax.intuit.com/tax-tips/marriage/should-you-and-your-spouse-file-taxes-jointly-or-separ...

https://ttlc.intuit.com/turbotax-support/en-us/help-article/income/getting-married-mean-taxes/L2Rgma...

https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/married-filing-separately-commu...

[Grande]

Thank you for your response. It looks like jointly, with my income included on the Social Security income worksheet even with the various deductions the total is well above the 85% of the SSA Benefit. Separately, with just her SSA income and not being allowed to use any of the deductions, it calculates out to be just about half of the 85%. So a significant difference. With my income, more of her SSA is taxed. Without my income, less of her SSA is taxed. Again, that is if I am following the rules correctly, and she does not have to include my income in the worksheet on her separate return.   

[xmasbaby0]

Are you in a community property state?

[xmasbaby0]

And...if you are trying to use that worksheet on the back of the SSA1099-----it is really tricky to use that even if it looks simple.   You should be entering the information into the software and let the software do the calculations.

[Grande]

I am in OH. Which wasn't on your list of community property states.

[Grande]

I did use the software. But, when I do her return as separate, it does not ask for my income. I had to do all 3 as on their own returns to make a comparison. Joint, Her, Me.

[xmasbaby0]

If you are not in a community property state (and OH is not one) it does not ask you for the spouse's income.   It only asks for the spouse's name, SSN and some personal information and it asks if you and your spouse will be itemizing deductions or using standard deduction.