MFS and Dependents

[RFS]

My wife and I do MFS because of student loan. We did the same last year and I had no problems because we each have a child that we could take the tax credit for every other year. However 2019 neither one of us takes the tax credit for our biological children. 

However, we adopted 2 children in 2019. Right now it is telling me as I fill out my wife's taxes that they are not eligible to be claimed by her. It asks if there is a decree, and I put No since we are not divorced. It then asks who makes more money and then says she cannot claim them on her taxes. I also chose the option that they spent an equal amount of nights with both of us as we were all together for 2019.

Why can't she claim one of the children and I claim the other? Why is it asking if there is an agreement when there is no divorce and I mark adopted?

[KatrinaB48]

One of the requirements for claiming a dependent is that the child must have lived in your home for more than half the year. If the two of you had the children an equal number of nights, then neither of you will qualify to claim the children. There must be a custodial parent and a noncustodial parent. 

[RFS]

We are married but MFS for student loan reasons. The kids lived with both of us every night of the year.

[LeonardS]

Have you compared the differences in your overall tax liability between filing jointly vs filing separate?

Whether or not you file jointly or separately is your choice but generally, if you are married it is more advantageous to file jointly. The following TurboTax article was written to help couples decide the best way to file. Should You and Your Spouse File Taxes Jointly or Separately? 

[RFS]

We are doing MFS due to a student loan my wife has. Taxable income affects her payment amount. 

My problem is that the system seems to assume we do not live together and asks about an agreement to claim the child on taxes. We both should be able to claim the 2 children or each claim 1 or something.

[xmasbaby0]

Are you trying to get adoption credits?  Filing MFS is a problem if you are trying to get adoption credits.

If you were legally married at the end of 2019 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 $24,400 (+$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...