Can me and my wife file “married filing separate”?
There is a possibility that MFS could be better, but you would lose any child and dependent care credit by MFS. This is only allowed if filing jointly. Try calculating your return MFS and have the higher income taxpayer claim the child and most of the interest on the home. This will lower their tax liability by hopefully putting them in a lower tax bracket. The goal is to get you both into the same tax bracket. By looking at your incomes, you claiming the child and the home mortgage interest could take you from the 25% tax bracket to the 15%. Thus more of your income is taxed at that lower rate. Give this a try and let me know if you see a difference. Another factor could be the state you live in. Depending if you live in a taxing state, the states tax rates may make filing separately more beneficial. Here in Ohio MFS can make a great difference in the bottom line tax.
You can figure it both ways and go with whichever way results in the lowest total tax, however in your case it is almost certain that you will pay MORE tax on separate returns than on a joint return. If you file separately and you itemize your deductions that will force her to itemize as well. Since you will have used up all deductions on your return that will force her to use a Standard Deduction of $0 which will substantially increase her tax bill. You will also lose out on the Child Care Credit on separate returns. FYI, a $1,500 refund is TOO HIGH. You are lending the government about $30 per week every week all year long in exchange for that refund. I’d suggest that you both kick your withholding allowances up by 1 on your W-4s at work. This will still leave you with a modest refund and $20 or more per week in spendable cash.
Yes, you can both file married filing separate, however, there are certain rules that apply. If one of you itemizes then both of you must itemize deductions. Your refund sounds about right, depending on how much money was withheld from your salaries. You make to much money to qualify for earned income tax credit or any other refundable credits and you both claimed one exemption on your w4 at work. If you purchased your home after April you may qualify for the First Time Home Buyers Credit. The idea is not to owe taxes at the end of the year, not let the government use your money all year interest free, so it sounds to me like you are doing the right thing. Try figuring your taxes both ways and see which way gives you the larger refund just split the itemized deductions between the two of you. Lee, Enrolled Agent This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided.
