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Filing a Joint Tax Return With Your Spouse
May Not Always Pay Off

Those wedding vows, promising never to part, doesn't necessarily apply at tax time.


Just because a married couple shares living expenses (which aren't deductible) doesn't mean they should share tax returns, despite the widely held perception that wedded pairs always reap benefits from filing a joint tax return.

"It varies from couple to couple," said Daniel Clifford, H&R; Block District Manager in New York City. "Our software is built so that each couple compares how they would do filing separately, and together."

Newly married couples often suffer a culture shock at tax time, Clifford said, when they realize that their combined incomes have pushed them into a higher tax bracket, than if they were still single.

Proposed legislation, however, could change this so-called "marriage penalty."

President Clinton wants to raise the standard deduction for married couples until it's twice the standard deduction for singles.

The House went even further by sending through a bill to raise the standard deduction for married couples, and to change tax rates, so that dual-income pairs aren't pushed into higher federal tax brackets until they have twice the income of a single filer.

  Filing as a Single vs. Filing a Joint Return
  Income Tax Bracket (based on income) Income for Joint Filers Income for Single Filers
  15% bracket $0 - $43,851 $0 - $26,250
  Beginning of 28% bracket $43,851 $26,251
  Beginning of 31% bracket $105,951 $63,551
  Beginning of 36% bracket $161,451 $132,601
  Beginning of 39.6% bracket $288,351 $288,351
  Standard Deduction $7,350 $4,400

But whether such proposals become law is yet to be seen. So in the meantime, married people still must muddle through the often complex issue of whether to file a single tax return, or separate ones.

Although most couples do pay less taxes when filing jointly, certain pairs might be better off parting ways during tax season.

For instance, a husband and wife could split the expense of their mortgage interest if they file separately.

And if someone with modest income racked up considerable medical expenses, she may not be able to take a medical deduction if she filed jointly with her husband, and he earned a high income.

This scenario could even apply to infertitility treatments, said Art Ford, a Massachusetts accountant and financial planner.

Many couples will find it makes more economic sense for the thousands of dollars in doctor's visits to appear on the woman's individual return, just as one of Ford's clients discovered this year.

"We find most of our married clients do better when they file jointly," Ford said. "But there are times when just the opposite is true. And people can be surprised."

Nevertheless, filing separately is not without its share of complications. As an example, some states with community property laws require married people who file separately to declare exactly half of their joint income. This could wipe out any tax benefits to the partner with low income.

Pairs filing separately also aren't eligible to take such tax breaks as the education tax and child and dependent care tax credits. As a result, most couples are likely to be better off getting together when it comes to tackling the annual IRS ritual.

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