There are many questions that come up when considering taxes. One of the most common is whether a couple should file a joint return or file separately. Because it really is the only option available, a person has to file one of the two. For the most part, filing a joint tax return seems to be more beneficial than those who elect to file separately. There is a marriage penalty, but this only comes into play if both couples are earning more than $75,000 per year. Under the graduated tax rate, this couple would have to pay anywhere from 0 to 39%.
It gets a little confusing to understand. For instance, if filing a joint tax return and the husband make $100 thousand per year. If the couple was in the 25% bracket and his income ate up the first 15%, after adding the wives income on top of that, it could exceed or be close to the 39% margin. While some measures have been taken to try to alleviate the marriage penalty with the standard deduction, a married couple still only gets $5,100 per person or $10,200 for a couple.
Dependents are a couple’s salivation when it comes to tax deductions. A dependent is a child. It can be an adopted child, foster child or step child. A child must be between the ages of 0-19 unless they are a student, and then the deduction extends up to 23 years of age. There are clauses that allow a person to claim their parents as a defendant, but there are specific rules regarding this. If a person is providing over half of anyone’s support, then they can be claimed as a dependent. Since this is a gray area, it is best to have a tax professional help out when it goes beyond a child dependent.
When there is a divorce or the custody of the children is split, things can get messy. The custodial parent is the one who gets to claim the children in the law’s eyes. However, oftentimes there are special agreements that allow the person to claim one or all of the children depending on the circumstances. If the children are living with the mom and the dad is paying support, mom still gets to claim the kids because she is custodial parent. While this is true in most cases, dad can have a special decree made that he gets to claim one or all the children. These can get into complicated tax issues that are best advised by a professional.
One filing status that some people try but can’t always pull off is head of household. A person who qualifies for this status is not married, yet still has dependents living at home. This tax bracket allows a person to have a higher tax break than one that files the single rate. Yet, not everyone will qualify for this type of filing. When it comes to tax issues, it is always best to have someone helping to advise, especially when the tax issues are out of the ordinary or have special issues involved.