For most Americans, filing a tax return is not an option. However, married couples do have the option of filing their taxes either jointly or separately. It is important to remember, however, that a person’s tax status is determined at the end of the taxable year. Accordingly, California couples who were in the middle of a divorce that had not been finalized by Dec. 31, 2015 are considered married by the IRS for that year .
Many legally married couples choose to file their taxes jointly because of the benefits this option offers. One of the most appealing benefits is lower tax rates. By filing jointly, the combined tax is generally lower than the tax rate for the married but separate filing status. In addition, joint filers can usually avoid paying the alternative minimum tax, whereas those who file separately will end up paying the tax because the AMT exemption will be lower.
Another benefit to joint filing is bigger tax breaks. Only joint filers can take advantage of several tax credits that can substantially reduce or eliminate a couple’s tax liability. Although separate filers can take advantage of the child tax credit, it is considerably reduced. In addition, those who file jointly enjoy a higher standard deduction amount, unless they choose to itemize their deductions. As for many itemized deductions, they are either eliminated or reduced via income phase-outs. Filing separately, however, can benefit those who are in the midst of a separation or divorce. Furthermore, filing separately relieves one spouse of being responsible for any fines, penalties or taxes that the other spouse refuses to pay.
Couples who are going through a divorce often face many financial and emotional challenges. However, family law attorneys can often offer solutions to help their clients come to a mutual agreement on a variety of issues.