Will TurboTax tell me if I would be better off filing separately from my spouse?

[VolvoGirl · Accepted solution]

No.  Not in the Online version.  In the Desktop program there is a What-If worksheet you can use to help you.  

You can not compare that in the Online version.  If you are using the Online version don't go changing it around.  It won't work and won't give you the right results.  And it will mess up your account and return. You just can't change from joint to separate.  For Online you would have to set up 3 accounts, 1 Joint and 1 each for both of you separate.  You don't have to pay unless you want to print or file.

Unless you have a specific reason to file separate returns,
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.

Also if you file Married Filing Separately up to 85`% of your Social Security becomes taxable right away even with zero other income.

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

[Audio27]

Thanks VolvoGirl!  We're in an interesting situation this year.  We live in the state of Alaska and have no state tax and my job with the state does not accrue Social Security as they have opted out of the system for a Supplemental Annuity.  I'm the primary income earner in the family, as the only income my wife gets is from the Alaska Permanent Fund Dividend.  In 2016, my wife cashed out a retirement account as she has no plans to return to the state to work, and it is causing a one year jump in income that we won't see in future years.  More specifically, her additional income pushes us over the $109K threshold for the Child Tax Credit and it appears other deductions have a lesser effect than they have in previous years.  We don't tale the EITC, CCC, and EDC because they don't apply to us or my sole income is too high to claim them.  Sooooooo - in this particular year I'm certainly wondering if there is any advantage to filing separately.