File Married Jointly or Separate in this situation

[GQPineapple]

Hello,

We recently bought a new home under both our names. Old home was just under one name. We are expecting a child. I have student loans and she doesn't. I have investment portfolio and she doesn't. We make nearly the same amount at end of the year. 

Question: Are we to file married jointly or separate? 

[xmasbaby0]

If you were legally married at the end of 2022 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 $25,900 (+$1400 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...

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.

[GQPineapple]

When you say file with both standard deductions (under filing separately) - In Turbotax it will ask, did you purchase a new home (yes), would we both claim the mortgage tax on the home under both if filing separately? And when child is born would parents claim the child since it's both standard deductions? Normally when we filed single prior to marriage and married filed separate, I would get little income tax return (paying the right amount of tax per year). And my spouse would normally get income tax per standard deductions with no investments, student loan taxes, or mortgage. Now since we are going to be on mortgage together and having a child, wondering how this would affect how we filed it before or still file it the same way just with the new items for deductions. Appreciate your first answer! Just need additional clarification if this makes sense.

[xmasbaby0]

You cannot "double dip" if you file separate returns.   So only one of you can claim the child and get the child-related credits.   The other spouse does not enter anything about the child.    And for mortgage interest and/or property taxes paid----if you are using standard deduction you have no reason to enter those. 

 If you are both itemizing them split up the mortgage interest and property tax between you in such a way that the total does not exceed 100%, or just one of you use those deductions.   You have to agree on how to split it.

If you file separate returns there are no deductions for student loans.   Filing married separately means NO education credits.