Married filing separately unique situation

[ba2usa69]

Hi,

I need a little bit of guidance since this is the first time we got into this situation, if anyone has any knowledge about the situation please feel free to write your comment.

My wife and i usually file jointly, but this year we might have to file separately mainly because of 1095(health insurance), when we signed up a year ago we estimated our income, well we ended up making a lot more then estimated so if we file jointly we'd have to pay full advanced tax premium credit back, but if we file separately there are caps on how much you need to pay back, we'd make significant tax savings.

My question is, when reporting our income, can i report all of income on myself(w2, capital gains from investments, interest payments), and wife to only add her w2 and not include any capital gains or interest payments?(we are in North Carolina, so we're not in community state) , asking because turbotax keeps asking my wife if i had interest payments and if i sold investments even though we're trying to file separately...

Any guidance will help, thanks

[xmasbaby0]

When you file married filing separately you both have to file the same way--either you both use standard deduction or you both have to itemize.   Even if it means one of you does not even get their whole standard deduction---so take that into consideration.

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.

If you were legally married at the end of 2020 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 $24,800 (+$1300 for each spouse 65 or older)  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.

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[ba2usa69]

Thank you for taking your time to explain in details, but, 

My question is, when reporting our income, can i report all of income only on myself(w2, capital gains from investments, interest payments), and wife to only add her w2 and not include any capital gains or interest payments?(we are in North Carolina, so we're not in community state) , asking because turbotax keeps asking my wife if i had interest payments and if i sold investments even though we're trying to file separately...

Any guidance will help, thanks

[xmasbaby0]

As long as you and your spouse follow the rules regarding itemizing or using standard deduction---you can divvy up the income any way the two of you can agree on since you are not in a community property state.

[ba2usa69]

Got it, so i can ignore the question that turbotax is asking my wife about my capital gains that i already claimed on my application and just keep her return simple with w2 only.

We're both taking standard deduction and we've already tried all 3 ways to do it(jointly and both separately) and our lowest return is filing separately.