Married filing separately results in less taxes

[bzybee08]

We have always filed jointly.  Normally we break even with taxes.  This year, we own nearly $7,000. I split our taxes to file separately and the joint taxes we owe was reduced by $2,000.  Both of us earn between 90k and 155k. It feels wrong to file separately, but the numbers are not lying.   Anyone else found this based on the new tax laws?

Our itemized deductions when joint was 23k so it selected the standard deductions. So filing separately, we both qualify for the standard deduction of 12k?

[PaulaM]

Yes, filing separately will halve the standard deduction for each of you. Each will receive $12,000 for the standard deduction. You might try the TaxCaster to test the results again.

TaxCaster

[NCperson]

as noted by PaulaM, it is possible that filing married- separately is better than joint; it's the less than usual case, but it can occur.

For example, one person doesn't make that much in wages, but has very high medical bills that exceed 10% of the AGI,.  The medical bills will be deductible (beyond 10%) where if there was a joint return, it wouldn't exceed 10%.

There are downsides when it comes to state and local taxes (SALT) as each can only take $5000 and there are downsides in man y other situations. 

Trusting TT to figure it out for you is the way to go; I wouldn't do this manually as the risk of error is way too high as the rules can be quite complex, depending on your personal situation. 

[bzybee08]

We earn too much to get any tax breaks from medical bills or student loan interests. When I separate our taxes to different accounts, my itemized deductions are 17k but her's is almost nothing. So we both take the standard and come out 2k ahead.

[NCperson]

clarifying questions

did you mean you took the $17k in deductions and  YOU filed 'itemized' and she took standard @ $12k?  that creates $29k of deductions where it would only be $24k as joint.  (you stated you each took standard) . if you both took standard filing separately , I don't understand the logic in how the taxes would have been so much less.

how did you decide to split the deductions? for example, if she has state withholdings, she has to take those - you can't.   Do you own a house TOGETHER?  how did you split the mortgage interest and the property taxes? if you took them all, WHY?  (and recall by going married-separate, the SALT deduction is maxed at $5,000 for each which motivates splitting and one person not taking it all but it depends who actually made the payments - you or your spouse)

[bzybee08]

When filing separately. I have 17k in itemized deductions, but I took the standard since changing to itemized made no difference.  I assume since mortgage interest and other stuff is capped?  So I left it as standard since my wife is filing with standard.

None of it makes sense to me since.  My tax payment is $500. Her's is $4,600.  That is $5,100 fed taxes.  Filing jointly, it comes to $6,300.  What makes a difference is that separately, I get $1,000 back in state taxes.. hence, separately, we save 2k.

Splitting our taxes is actually easy since the only joint item is the state tax refund from last year.  She has a house in her own name that she rents. Our primary house is in my name.

[bzybee08]

So.. I just figured out what is happening.  There is a bug in the website.    The $500 in my return was it being set to itemized.. but then I changed it to standard on one screen and it stayed at $500 even though my itemized deductions are 17k. There is another screen that when set, changes the figure.. but you can by pass this by jumping ahead for the options above.  So it looks like you are doing standard, but in fact, you are not.  

[bzybee08]

When I itemize both of us, we do save still, but it is only $400.  Not worth separating our taxes.