From: Hayward California

Dear TaxMama,

I will be retiring soon with a small pension and Social Security.

My wife is still working.

Currently, we are filing jointly, should we file individually to save on taxes?

Mark

 

 

Hello Mark,

You lucky dog!

I am so glad that you asked this question before preparing your next tax return.

The answer is an emphatic I HAVEN'T A CLUE.

Actually, I was going to say, NO.

Then, I realized I don't know anything about your combined finances; your wife's job and her job related deductions. Or if you're paying for a mortgage, or about either of your healths... Or anything at all about you.

So, let me point you to a few things to consider, OK?

When you file separately, instantly 80% of your Social Securtiy income is taxable. But if your wife's wages are over around $30,000 - the same thing happens anyway. So that stops being an issue.

If one of you has a lot of medical expenses and the other doesn't, that may be a good reason to file separately. That 7.5% of adjusted gross income (AGI) drops when it just refers to your small pension.

If she has a lot of unreimbursed out of pocket expenses related to her job, then, not having your income on her return makes the 2% of AGI that she has to overcome on Schedule A much lower.

But if you file as married filing separately, you will both have to itemize, even if you don't each have enough deductions to use. So it might cost one of you part of your standard deduction.

Aren't you sorry you asked?

So, the short answer is - schedule an appointment for after tax season this year with your tax professional. Do some planning to see how you come out best.

And really, Mark, enjoy being retired. FInd something fabulously new to learn about!

Best wishes, Eva Rosenberg, MBA, EA