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Politics : A US National Health Care System? -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (36450)	5/3/2014 4:08:07 PM
From: TimF	Respond to of 42652

With two high earning couples, you can have a situation where they have a lower tax rate if they file separately. Also with one spouse's income so high that even filing jointly their income alone would be enough to get the highest tax bracket, and the other spouse having enough income to matter, but not enough to be in a high tax bracket, they might be better off filing separately. But if they do - here are several disadvantages to filing separately that you need to be aware of, however, because these can easily outweigh any potential benefits: You cannot take various tax credits, such as the Hope or Lifetime Learning education credits, earned income tax credit, and, in most cases, the credit for child and dependent care expenses. The amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 if you file a joint return). You cannot take the deduction for student loan interest, or the tuition and fees deduction. You cannot exclude from your income any interest income from qualified U.S. savings bonds that you used for higher education expenses. If you live with your spouse at any time during the tax year, you’ll have to include in income more (up to 85%) of any Social Security benefits you receive. If you live with your spouse at any time during the tax year, you cannot roll over amounts from a traditional IRA into a Roth IRA. The following credits and deductions are reduced at income levels that are half of those for a joint return: child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions. Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return). You may not be able to deduct all or part of your contributions to a traditional IRA if you or your spouse was covered by an employee retirement plan at work during the year. If you own and actively manage rental real estate, it will be more difficult for you to deduct any losses you incur. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return. nolo.com Some of those aren't really disadvantages over a non-married couple filing seperately, they are just a reduction in deductions or credits to the same level non-married individuals get. But not getting the student related deductions, having to include more Social Security benefits as taxable income, not being able to roll over IRAs, the reduction in capital loss deductions (at first glances this seems like just going to an individual level since its just cutting it in half, but non-married individual filers can deduct the full $3k, that's another way married people are disadvantaged, non-married couples can deduct $6k), more difficult to deduct rental expenses, and many some other things are all real disadvantages compared to not being married. Still most couples do better filing jointly, then not being married but that isn't universal.