West Tax|Western Tax and financial Information

(continued from How Getting Married Affects Your Taxes)

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In contrast, if you file separately, you have to liability for your spouse’s tax screw-ups or intentional misdeeds. Bottom line that if you have doubts about your new spouse’s financial ethics in general and their attitude about paying taxes in particular, i suggest you to filing separately until those doubts are completely dispelled. Although your tax bill might be somewhat higher than if you file jointly, it could be a small price to pay for “insurance” against the joint-and-several liability threat.

Will you pay the marriage penalty or collect the marriage bonus? You’re undoubtedly heard about the tax penalty on marriage. It causes some (but not all) married joint-filing couples to owe more federal income tax than if they had remained single. The reason is because aat higher income levels, the tax rate brackets for joint filers are not twice as wide as the rate brackets for singles. For example, the 28% rate bracket for singles starts at $82,400 of taxable income (for 2010). For married joint-filing couples, the 28% bracket starts at $R137,300. If you and your spouse each have $80,000 of taxable income, you’ll get socked with a $681 marriage penalty because $22,700 of your combined income falls into the 28% rate bracket. If you stayed single, none of your income would be taxed at more than 25%.

On other hand, many married couples actually collect a tax bonus from being married. If one spouse earns most or all of the taxable income, it’s highly likely taht filing jointly will reduce your tax bill, the marriage bonus. Bottom line that if you and your spouse both earn healthy and fairy equal incomes, you’ll likely fall victim to the marriage penalty. If not, you’ll likely collect the marriage bonus.

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In this opportunity, let me help you decide between, “standard, or itemized tax deduction?”. Deductions reduce your taxable income. Less income means a smaller tax bill. What’s the best way to reach the smallest possible taxable income level? Is it should be with a standard or itemized deduction? Well, it depends on your personal circumstances.

The Internal Revenue Service (IRS) says most taxpayers use the standard deduction. The amount is different for each filing status and is higher for blind taxpayers and thse who are ages 65 or older. The amounts are also adjusted for inflation each year.

When can we say that standard deduction amounts has increased? Married couples who’ve been submitting joint returns for a while, will notice their standard deduction amount has jumped sustantially in recent filing years. They can thank inflation adjustments, as well as tax law changes in place through 2012, that are designed to help ease the marriage penalty. And some older and visually impaired taxpayers may be able to cut their tax bills with even larger standard deduction amounts by simply checking a couple of boxes on their tax returns. That means the standard deduction might now be appealing to even more taxpayers. Remember, you always want to use the deduction method that gives you the biggest tax advantage.

continue to standard, or itemized tax deduction? (part 2)