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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10130
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I need to decide how to file my taxes for 2013. I make ~230k

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I need to decide how to file my taxes for 2013. I make ~230k with the suual writeoffs for a home. My wife makes ~30k but she does not withhold anything. So, under 2012 tax law, if I file married - separate, I owe ~5k, and if I file married - joint, I pay ~5k. Does anyting change for 2013 which would favor one filing status over another? I would prefer to file married - separate, since I am going through a dovorce and it won't be final until 2014. However, if it is going to cost me thousands of dollars to do this, I want to file jointly. I'm just not sure if the 2013 changes will have that drastic of an affect and wanted to check with someone who has the answer.

Lane :

Hi ... honestly about the only reason to file separately IS the one you gave (keeping things separate), but financially married filing jointly almost always makes more sense ... For example, for 2013 the personal exemption that everyone gets is 3900 (you'll see two of them on the joint return) but they are phased out at certain income levels; for married filing jointly phaseout begins at 300,000 ... but for separately they're phased out a 150,000 ... also the standard deduction is $12,400 for married filing jointly and only $6,200 for filing separately (although that may not make a different as you probably itemize and your itemized deduction will be more than that ... the factor that will make the MOST difference is the tax bracket for filing married jointly as opposed to separately (for jointly the brackets tax much higher levels of income a t lower rates: See this:

Lane :

Here's married separately:


Married Filing Separately Filing Status


[Tax Rate Schedule Y-2, Internal Revenue Code section 1(d)]



  • 10% on taxable income from $0 to $8,925, plus

  • 15% on taxable income over $8,925 to $36,250, plus

  • 25% on taxable income over $36,250 to $73,200, plus

  • 28% on taxable income over $73,200 to $111,525, plus

  • 33% on taxable income over $111,525 to $199,175, plus

  • 35% on taxable income over $199,175 to $225,000, plus

  • 39.6% on taxable income over $225,000.

Lane :

And here's married filing jointly:


Married Filing Jointly or Qualifying Widow(er) Filing Status


[Tax Rate Schedule Y-1, Internal Revenue Code section 1(a)]



  • 10% on taxable income from $0 to $17,850, plus

  • 15% on taxable income over $17,850 to $72,500, plus

  • 25% on taxable income over $72,500 to $146,400, plus

  • 28% on taxable income over $146,400 to $223,050, plus

  • 33% on taxable income over $223,050 to $398,350, plus

  • 35% on taxable income over $398,350 to $450,000, plus

  • 39.6% on taxable income over $450,000.

Lane :

look at the 25% and 28% tax bracket for both

Lane :

Nothing is really changing for 2013 other than the exemptions goin up to 3950

Lane :

And here's a really great way to think through the differences (from turbotax):

Lane :

When filing jointly, your tax return reports a single taxable income number that reflects your earnings, as well as your spouse’s. You then calculate the tax you owe using the married filing jointly tax brackets. There are six brackets—each of which imposes a different tax rate on specific portions of your taxable income. And as your taxable income progresses through each tax bracket, the tax rates increase.


The benefit of filing jointly over separately is that each tax bracket covers a wider range of taxable income than the married filing separately brackets do. Essentially, this means that more of your joint income is subject to lower rates of tax, which many times results in lower tax bill in comparison to calculating separate tax bills on the same earnings. And the larger the difference in the income that you and your spouse each earn, the more tax you will save by filing jointly.


Filing a joint return can reduce your taxes even more by itemizing deductions and taking all available tax credits that you and your spouse are eligible for. This is because when you file a separate return, the IRS places significant limitations on your ability to itemize deductions and to take tax credits – regardless of the fact that you and your spouse would otherwise qualify if filing a joint return instead. One drawback of filing a joint return is that you and your spouse are separately responsible for all tax—not just the tax that relates to your own earnings.


To illustrate, suppose you earn $50,000 per year and your spouse earns $100,000. Although you earn one-third of the income, you are solely responsible for the tax that is due on $150,000 if your spouse is unable to make payment. In other words, the IRS will not allocate an income tax debt between spouses who file joint returns. Under very limited circumstances, however, the IRS can grant various types of relief that either eliminates the joint liability or reduces the amount of tax you are responsible for.

Lane :

Make sense?

Lane :

I see that you're standing by (according to MY screen) Questions? ... Sorry for the data dump, just wanted to get the foundation out there (costs of married filing separately)

Lane :

Are you with me?

Lane :

I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here) ... Please let me know if you have any questions at all

Lane :

I'll be watching for you in Q&A...

Lane :

Let me know...

Lane :

Lane

Hi Joe,

 

Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.

 

But if you have any questions at all, please let me know,

 

Lane

 

Customer: replied 3 years ago.


Thanks for your input, Lane. It was enlightening. I appreciate it!


You're very welcome ...

Let me know if I can help further.

Lane
Lane and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Hi Lane,


 


I'm remodeling my house that was a rental for seven months this year. It's vacant now and won't be completed until the end of the year. I am spending way more in remodling expenses than I collected in rent. Is there any way to write off these expenses?


 


Thanks


 


Joe,



Hi,

IF you don't mind, I'd like to ask if we can handle separate questions separately.

I only get credit when you rate one ... if I keep answering on the same questions without you either rating on the first one first, OR asking it as a separate questions, the I only get credited on time.

(Don't LOVE that part of the system myself)




But for now, lets go ahead and deal with the second one here:

On the rental. you can use schedule E to write off repairs and maintenance ...

and then the actual improvements to the structure itself? You'll get the benefit of that by it increasing the cost basis when you sell.



SO, basically, the IMMEDIATE gratification comes when you do regular repairs, (replacing doorknobs, repairing a cabinet or counter top, painting, and all the other regular day to day expenses, advertising driving back and forth to the property, etc.

But when you actually make an improvement like NEW cabinets, new deck, adding TO the property in some way ... that increases your basis in the property, so you'll pay less in capital gains tax when you sell it.




Here's a pretty good listing of the two:


Repairs & Maintenance:

refinishing a wood floor
repainting a room
repairing a roof
repairing existing plumbing
repairing existing appliances
replacing a doorknob
replacing a window
replacing a broken smoke detector
replacing rotted floorboards
replacing cracked floor tiles


Improvements:

adding an addition
adding central air conditioning
installing a security system
installing brand new carpet
replacing an entire roof
replacing all existing plumbing
replacing all existing electric
renovating a kitchen
replacing all windows


Hope this helps

Lane

Positive Feedback is appreciated. That's how I get credit for the work.
Lane and other Tax Specialists are ready to help you

... Appreciate the rating Joe!

If you yo work with ME again,mask your question here:

http://www.justanswer.com/profile.aspx?PF=1929974&FID=20

Thanks again,

Lane