Let’s begin by saying that there are very few instances I’ve seen where married taxpayers end up paying less in tax by doing Married Filing Separate (MFS) returns. This is because, by law, couples opting into a MFS environment cannot take advantage of several tax breaks. These include…
1 – The American Opportunity Credit
2 – The Lifetime Learning Credit
3 – The Child and Dependent Care Credit
4 – Student Loan Interest Deductions
5 – Additional Social Security Benefits May Become Taxable
6 – Contributions To IRA’s Are Affected
This is but to name a few. In the vast majority of cases, a Married Filing Joint (MFJ) return is the ticket that saves the most money.
But there are a few newer twists in the tax system that may negate these detriments, which include…
If you have one spouse who is doing something wrong, then a MFS return might be the ticket, no matter what the additional costs. In this instance the individual spouses aren’t responsible for the information on the other’s return.
The repayment amounts of many education loans are based upon income. Many taxpayers who have a spouse earning a substantial income, find that doing a MFS return will save them more money on the repayment of their education loans.
Schedule A Medical Deductions are limited to those in excess of 7.5% of your adjusted gross income. This is another instance where if your spouse earns a lot, you may save money in a MFS environment.
Qualified Business Deduction
QBI provides a deduction of up to 20% off pass-through-entity business income. This is only provided if your income is below a certain threshold which is $182K for singles and $364K for married couples. Once again, if your spouse earns plenty, we might consider a MFS return.
In all of these instances, any savings must be weighed against the additional taxes which will probably occur. If you have questions, please contact our offices.
The MFS filing status was originally created for married couples where one spouse was in prison. Those forced to use it were considered pariahs. My how things have changed.
Let me leave you with this.
I recently visited an old and close friend; an Entrepreneur at the top of his game who just signed papers to sell the real estate where the family business is located. He’s worked there for the past 54 years.
He started when he was 12.
To say that this is a way of life for him, his wife, his children, and his grandchildren is an understatement. But a developer came by and made them an offer they couldn’t refuse.
I won’t mention his name, the name of the business, or even what industry they’re in. For our purposes today, that would be irrelevant.
I asked him if he was excited about retiring and his answer was a flat “No”.
I asked why and he said, “I’m 66 and at the top of my game. There’s so much more to do, so many more mountains to climb, so much more to accomplish.”
Think about it. After 54 years of dealing with men, money, material, machinery, and marketing he still wants more. After all those years of controlling product, price, promotion, and place, while being at the top of his game and not having anything left to prove, he still has that drive.
In so many ways, this was the most beautiful thing I’ve heard or seen in several years.
Interestingly enough, I recently had the occasion to talk to one of my relatives who questioned me about my career. They looked at me like I was crazy because I said that I look forward to coming to work every day.
I tried to explain that it was different for Entrepreneurs. They wondered how that could possibly be and asked if I wouldn’t be happier doing something that I actually wanted to do.
I explained that doing what I want is the only thing I’ve actually done for the past 33 years. Such is the essence of Entrepreneuring.
We all have difficult days. But any day where you’re in control of your destiny is better than the alternative. Captaining a ship isn’t easy. But for those of us who can, it’s the only job in the world.
As for my friend, I don’t know what his future holds. According to him, several things have piqued his curiosity.
But one thing is certain. The spirit of adventure that led all of us to our individual callings still courses through his veins. May whatever God you pray to bless him and his family on their next adventure.
Heavy is the head that wears the crown. But the view never changes in this life if you aren’t the lead dog on the sled team.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, M&A Due Diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Accounting Solutions Ltd.
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