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Old 08-03-2016, 12:52 AM
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best tax strategy

Hi,

This is roughly our tax situation.
Spouse 1 income: $400k
Spouse 2 income: $100k

Property tax: $15k
Mortgage interest: $25k

State tax withheld (spouse 1) :$40k
State tax withheld (spouse 2) :$10k

What is the best tax strategy? We are getting hit by AMT. Filing joint or filing individually. I was thinking filing individually and tagging the property tax and mortgage with spouse 2 might be better idea?



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Old 08-04-2016, 12:20 AM
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Join Date: Oct 2010
Posts: 5,233
This is roughly our tax situation.
Spouse 1 income: $400k
Spouse 2 income: $100k

Property tax: $15k
Mortgage interest: $25k=. You can never claim $40K on your return UNLESS you itemize them on Sch A of 1040 however you still may claim part of or most o the $40K on your state return, depending on your sate tax rule.

State tax withheld (spouse 1) :$40k
State tax withheld (spouse 2) :$10k=====.As mentioned above; you can never itemize $50K of state taxes UNLESS you itemize deductions on your Sch A of 1040; or you may have to include refund from your state aslongas you itemize your state taxes on federal return and receive refund from your state.

What is the best tax strategy?===>I should say, it depends; In some situations, deciding to file separately rather than jointly is a mathematical decision based on analyzing the combined separate tax liabilities compared to the joint tax liability.
In other situations, deciding to file separately is a decision based on whether each spouse wants to accept full responsibility for the accuracy and payment of tax that comes with a joint filing.
For some couples, there are non-tax reasons for filing separately, such as keeping their finances separate from each other.
nobody knows which filing status is the BEST; as you are married according to Federal law, you have a choice of filing Married Filing Jointly or Married Filing Separately . Married Filing Separately taxpayers are only responsible for their income and taxes(and not for a spouse, but may not be eligible to claim the tax benefits such as Tuition and fees deduction, Student loan interest deduction or earned income credit etc . Other drawbacks of Married Filing Separately are;taxpayers have a much lower income phase-out range for IRA deductions.Both spouses must claim the standard deduction, or both must itemize their deductions. One spouse cannot claim the standard deduction if the other is itemizing.This filing status generally pays the most tax of all the filing statuses. There are specific situations when it can be better to file separately. For example, when you need to separate your tax liability from your spouse. If you file separately, you will only be responsible for the accuracy and payment of taxes for your own return.In certain situations when there is a large disparity between incomes of the spouses. This may result in a combined lower tax situation, but usually only in separate I mean non-community property states.




We are getting hit by AMT. Filing joint or filing individually. I was thinking filing individually and tagging the property tax and mortgage with spouse 2 might be better idea?=======..So as said, If you are not sure, complete your taxes both ways to see which one may be best for you; in some cases, when there is a large disparity between incomes of the spouses. This may result in a combined lower tax situation, if you live in separate , non-community property states. When one or both spouses live in a community property state special rules apply for allocating income and deductions between each spouse?s tax return.
Each spouse generally reports one-half of the total income on each tax return.
The same goes for deductions, each spouse generally gets half of the deductions. This is not often exact, as for couples with an odd number of children. All tax professionals and many tax programs allow you to split a tax return to see the results. You will enter items of income, deductions, and other items and identify each item (by a check box) as to which spouse they apply to. When the program splits the return it will use that information to assign the items to the respective spouse. The Married Filing Jointly filing status provides more tax benefits than married filing separate filing status, but taxpayers will need to weigh the pros and cons and decide for themselves which is the best filing status.



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