Last year, my wife and I filed taxes married filing separately. We have our home mortgage under my name so the tax benefit was better if we filed separately.
This year my wife gave birth to our first child.
How should we file this year? Would only one of us claim the baby as a dependent and get the child tax credit? Both my wife and I work and make similar incomes. No other major assets, deductions, or anything else to claim.
99% chance you filed your taxes incorrectly last year. For MFS is one person itemizes the other person has a standard deduction of zero.
MFJ is the best filing status except in certain circumstances.
@Riley
How so? I itemized my deductions using the amount of mortgage interest I paid. My wife isn’t tied to our mortgage so she used the standard deduction.
Darby said:
@Riley
How so? I itemized my deductions using the amount of mortgage interest I paid. My wife isn’t tied to our mortgage so she used the standard deduction.
If one person itemizes then the other person has to itemize. Be prepared to get audited. You can file an amendment to switch to joint or for her to itemize with zero deductions. If you wait for an audit they will probably charge you a 20% penalty.
@Noor
Okay thanks. We used H&R Block. Any pros and cons to doing amended joint or amending my wife’s defection to zero?
If we amended to joint, would that mean we need to do 2 amended returns?
Darby said:
@Noor
Okay thanks. We used H&R Block. Any pros and cons to doing amended joint or amending my wife’s defection to zero?
If we amended to joint, would that mean we need to do 2 amended returns?
No. If you amend to joint you only need one amendment.
Darby said:
@Riley
How so? I itemized my deductions using the amount of mortgage interest I paid. My wife isn’t tied to our mortgage so she used the standard deduction.
The tax laws are codified in US Code Title 26, and one part of that section 63(c)(6) contains this provision:
(6)Certain individuals, etc., not eligible for standard deduction
In the case of—
(A)a married individual filing a separate return where either spouse itemizes deductions,
(B)a nonresident alien individual,
(C)an individual making a return under section 443(a)(1) for a period of less than 12 months on account of a change in his annual accounting period, or
(D)an estate or trust, common trust fund, or partnership,
the standard deduction shall be zero.
“We used H&R Block”
Oof…H&R Block allowed/encouraged your wife to take the standard deduction instead of zero, when you itemized? I’d use that little tidbit to get them to resolve this situation for free…but with a different preparer.
Changing from separate to joint requires amending one of the returns; the IRS will disregard the other return when they receive the amendment. Probably in your case, better to amend yours.
https://www.irs.gov/instructions/i1040x#en_US_202402_publink11362hd0e1067
Be prepared to owe money back.
No recommendations on which status is better for you; however, rarely does it come out ahead to file separately. Like, almost never. But only your tax preparer can figure that out…possibly…
The 2024 edition of form 1040 is available for download from IRS.com. If you’re not willing to wait for software to become available, I suggest downloading the form and seeing for yourself which is better.
I’m not aware of any hard and fast rules to determine which is better…except:
@Jin
The other common time (or at least, not uncommon) is when one spouse has a low AGI and high medical expenses, since the floor for that is a percent of AGI.
It will most likely be more beneficial for you to file a joint tax return. You can still deduct the mortgage interest if you file jointly and itemize your deductions.
Ellis said:
It will most likely be more beneficial for you to file a joint tax return. You can still deduct the mortgage interest if you file jointly and itemize your deductions.
My guess is that filing MFJ, the couple could not itemize due to higher standard deduction. But, of course, the standard deduction for MFJ is likely much better than him itemizing and her having no deductions. I think the Blockheads didn’t explore all the options.