Optimal Tax Filing Approach: Joint or Separate for Newlyweds with Individual Home Ownership?
Navigating joint tax filing: My husband and I each owned homes before getting married last tax season, both paying individual taxes. Additionally, my husband sold his home during that time. Should we file jointly or separately? Seeking insights on the best approach for our situation.
Answers
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Thank you for joining our community, Dqthom.
Congratulations on your Marriage. This is an "it depends" situation. You have the option to file separately or jointly. You can enter your return as jointly to see if this saves on the refund or tax owed amount, and/or change to Filing Separately to compare. Generally, Married Filing Jointly is the better option based on the tax rates and standard deduction. However, joint filing combines both incomes. The sale of the house may push you to owe some taxes. There is a Capital Gain Exclusion amount based on how many years he resided in the home before the sale. This would be living in the home 2 out of the last 5 years.
One other concern that wasn't address is what state you live in. Please search to see if you reside in a Community Property state rather than replying with personal information to this message. That could make the Married Filing Separate return more complicated.
CoryF
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Cory, thanks for your insights. Regarding property taxes in Maryland, if we decide to file jointly, should we combine the property taxes we individually paid for our separate homes on our federal tax return? The online tax application didn't allow specifying for each address. Also, just to update, my husband did meet the 24 months of residency for the Maryland property he sold before moving in with me. Thanks!
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Excellent followup question.
You would combine the Property Taxes paid from both homes on your Federal return. There is no claiming limitation on the property that you pay taxes on. However, there is a federal limitation in that only $10,000 worth of State taxes paid (income and property) is deductible for the Schedule A Itemized Deductions. There may be a benefit on the Maryland return for property taxes paid.
