18 May We are newlyweds. I earn a lot more. How should we file taxes?
Q. My wife and I are newlyweds, married 6 months ago. With the recent tax filing extension, it’s giving us more time to consider how to file our 2019 taxes. I am a W-2 employee while she is a 1099 who itemizes expenses. We bought a house in 2019 but the mortgage and property title is entirely in my name. I am also in a much higher tax bracket, earning more than $100,000 while she makes about $25,000. Does it makes sense to file jointly or separately?
A. When it comes to filing married filing jointly or married filing separately, it is almost always better to file jointly.
Let’s take a closer look at your situation.
To look at the difference for you filing jointly or separately, we asked Gail Rosen, a Martinsville-based certified public accountant, to do some calculations.
She looked at computing your taxes married filing jointly versus separately, with $100,000 W-2 wages for you, $25,000 net income from your wife’s self-employment, and subtracting the standard deduction.
Because you bought your house mid-year you will not have enough to itemize this year, she said.
Under this scenario, you potentially could save approximately $4,300 filing jointly, she said.
“This is because your wife is entitled to the qualified business income deduction based on her independent contractor net income,” she said. “The qualified business income deduction would be $2,440 more if you file jointly, since the deduction would be adjusted downward based on her smaller taxable income if she filed separately.”
“In this case, the standard deduction amount would be zero for the non-itemizing spouse,” she said.
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This story was originally published on May 18, 2020.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.