5 Tax Saving Tips for Couples

Filing your taxes can be stressful enough on your own, and filing your taxes with your spouse makes the process even more complicated. Fortunately, there are many benefits to filing your taxes as a married couple, including deductions and credits that only married couples can enjoy if they file their taxes jointly.

If you’re filing your tax return with your spouse this year, here are some tips to save money:

1. File jointly to lower your tax bracket.

This is important because some of the many other tax benefits on this list can be achieved by filing taxes jointly with your spouse. In about 95% of cases, married couples file joint returns, and they do so because there are many benefits.

One of the most important benefits is that married couples report their income jointly. low tax bracket. For example, the marginal tax rate for a person making $200,000 is 32%. However, a single-income couple earning $200,000 per household would only be in a 24% tax bracket.

Although having a lower tax bracket benefits almost all married couples, there are times when it makes sense to file separately. People typically do this if they are divorced or legally separated, or if the difference between spouses’ income is large and allows them to claim many itemized deductions.

2. Donate to an IRA

If you have income, you can put money into an Individual Retirement Account (IRA). However, couples who file taxes jointly have a special opportunity where the earning spouse can contribute to the non-working spouse’s IRA.

For example, if one spouse works and the other is a homemaker, the couple can contribute $6,500 (or $7,500 if they are 50 or older) to an IRA for themselves and their spouse for tax year 2023, for a total of $13,000.

For couples with Traditional IRAs, this means they can significantly lower their taxable income even if one spouse has no income. For example, making a total allowable contribution of $13,000 in 2023 could lower your adjusted gross income (AGI) by $13,000 and lower your tax bill.

3. Claim the Earned Income Tax Credit if you qualify.

Couples with low to moderate incomes can save on taxes by claiming the Earned Income Tax Credit (EITC). The amount you receive depends on your income, marital status, and number of children.

For example, a married couple with a combined income of $55,000 and two children filing jointly could potentially receive an EITC of $938. If the same couple has three or more children, the tax credit is up to $1,763.

You can find out if you qualify for the EITC by answering questions on the IRS’s online EITC Assistant. The Center on Budget and Policy Priorities website also has a helpful EITC calculator that estimates how much you could receive from the EITC based on your filing status, household income, and number of children.

You and your spouse can claim the credit even if you don’t have children, as long as you qualify. The good news for those who qualify for the EITC is that if your credit is more than you owe in taxes, you can get that money back.

4. Reduce tax filing costs

Couples who file their taxes jointly do not have to pay separate tax filing fees, which can result in significant cost savings during tax season.

The average cost to file taxes is $300 to $600. If you file separately, you can pay $1,200 to file both your and your spouse’s returns. And if your particular tax situation is more complicated (for example, you’re self-employed or have income in multiple states), your filing costs could be significantly higher.

If you hire a tax professional, the cost of filing a separate return can be further complicated by the additional work time.

5. Take the standard deduction

Married couples filing jointly can claim the standard deduction of $27,700 for tax year 2023. Although some people think they can save more on taxes by itemizing their deductions, most people benefit by taking the standard deduction.

Taking the standard deduction not only saves you money on taxes, but it also takes much less time than compiling all your itemized deduction documents. Perhaps this is why nearly 90% of filers take the standard deduction.

There are some instances where itemizing can be effective, including if you own a home and your total mortgage interest, insurance, and real estate taxes are greater than the standard deduction. Or, if you pay more than 7.5% of your AGI in out-of-pocket medical expenses, you may want to consider itemizing.

But most couples can save more by taking the standard deduction.

One Bonus Money Saving Tip

Tax software makes it easier than ever to maximize your deductions and take tax deductions. The good news is that the IRS is partnering with some tax software companies, including TaxAct and TaxSlayer, to offer free filing in 2023 to households earning $79,000 or less.

You can learn more about free filing options on the IRS website. Prepare your tax return from last year to see if you can enter last year’s AGI to see if you qualify.

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