Many married couples elect to file their taxes jointly because it is genuinely cheaper. Well, most of the time. If you’re a real estate investor, you likely already know that the typical rules don’t always apply to you. Filing jointly may end up costing you more depending on your situation and a variety of other factors. Let’s look at three common situations where filing separately is typically cheaper for married real estate investors.
When Both Spouses Have High Incomes
Being a high earner is something most investors aspire to. But there are some drawbacks to both spouses being professionally successful. If you and your spouse are earning $309,900 or more annually, filing jointly could disqualify you from certain deductions that would otherwise save you money. This income level is not unusual if both spouses are real estate investors.
In these cases, it’s best to work together by filing apart. You will each be eligible for more deductions by filing separately. You will still need to work as a team to ensure you aren’t both itemizing the same deductions. But ultimately, taking the time to review your separate filings will preserve your collective wealth.
When Your Spouse Already Owes The IRS
If your spouse owes the IRS, filing together could cost you your refund. If you file jointly, the IRS will seize your refund to satisfy your spouse’s debt. If you’re relying on that refund for something essential like making a real estate investment, it is best to file separately until your spouse’s tax issues are resolved.
When You’re Getting a Divorce
If you are in the process of getting divorce or have a reason to suspect your spouse is dishonest when it comes to taxes, filing separately isn’t cruel. It’s the smart move. Even though you may want be to trust your spouse, if there is any love lost or trouble in paradise, filing separately will protect you. Liability attaches once you both sign and file the return. Essentially, you’re treated as a unit for tax purposes. Divorcing partners have been known to shuffle around debt or attempt to hide assets. If you are experiencing any of these problems, filing on your own is actually a form of asset protection.
When in Doubt, Contact a Professional
If any of this information or the filing process is confusing, know that there are professionals here to help you save on your taxes, our tax attorneys Royal Legal Solutions can assist you with making the judgment call about filing jointly or separately. We work exclusively with real estate investors and know these issues well, and have assisted many married professionals in the past. When you work with us, you also have access to the CPAs we have personally vetted. Get professional help to avoid giving your hard-earned money to Uncle Sam.