Tax season is upon us every Monday. Here on
closing Bell, we are tangible tax filing tips to
make sure that you get the biggest refund check possible
. And today we're discussing filing taxes as a married
couple, you might assume that you should always file
your taxes jointly with your spouse. And while it
makes sense, most of the time, there are
specific instances where you could save big bucks by separating
your filings. So joining me now to break it
down is Tom CPA and C financial consulting firm.
Wealth, Ability Tom, thanks so much for joining
and talk to me about why joint filings do tend
to be a better option when it comes to married
couples. Well, normally you end up with a
lower rate if you filed married filing jointly because you
, you get just a slightly better tax brackets,
especially if you're both making good income. Um,
but there are times when it does make sense to
file separately for sure. And what are some of
those instances where it might make more sense to file
separately? Well, a any time that you have
, you know, like student loan, uh,
deferment or anything that is based on one spouse's income
. So it's that spouse and their income. It
makes sense. Ok, I need to keep my
income low and, and I don't want to add
my spouse's income to my income. So, uh
, student loan deferment is one of those. Another
time is, let's say that you, you have
one spouse has a lot of medical expenses. Well
, of course, we've got the 7.5% limitation on
medical expenses. So if that one spouse has the
high medical expenses, then they might get more of
that deductible simply by filing, married, filing separately
. So there are those times it's pretty rare,
but it's pretty easy to run the numbers and see
which way is best for you a lot of people
to do have student loan debt. And so if
that is you in a relationship, how should you
approach that? Two people are married together, some
with student loan debt? Well, certainly the one
with student loan debt needs to say, look at
their taxes and actually calculate what would my taxes?
What would my student loan deferment be? Not my
taxes? But I have to look at both my
my taxes. What are my taxes if I do
married finance separately compared to the benefits of say a
student loan interest deferment, which is what we've been
seeing a lot of uh lately um during the pandemic
is we still see this interest um deferment on student
loans. So, you really have to calculate both
sides because you might get hurt on the tax side
, but you might make it up on the loan
interest side or the loan payment side. What about
for business owners, Tom, how should they approach
filing taxes? So, so business owners for the
most part should actually set up as a corporation or
limited liability tax as a corporation and probably should be
an S corporation that's a pass through entity. They
get special tax benefits, by the way, um
Over 20 states now allow special tax benefits for uh
pass through businesses like an S corporation or a partnership
. And you can end up actually with lower tax
rates as well as special tax deductions. So when
, when you've got a business, that's the time
that you need a tax professional on your side.
Um If, if you've got more than that W-2
and you actually have a business, you probably want
to sit down with the CPA or another tax professional
. So when should you consider filing, creating an
L C Tom versus an ESP? Well, so
most states, an LLC is better from an asset
protection standpoint, you know, you're protecting your other
assets from your business. Businesses tend to attract um
lawsuits. So we want to protect our other assets
like our home and our stock investments from any kind
of lawsuit on the business. So that's when we
might uh form a limited liability company. But the
one thing that a lot of business, business owners
don't understand is that you can be a limited liability
company and be taxed like an S corporation. So
, just because you're not a corporation doesn't mean you
can't be an S corporation for tax purposes. It's
a very simple election to make and something that your
CPA can do in about five minutes. All right
, Tom Wright C P and C financial consulting from
wealth ability. Thank you for joining.