While most married couples file jointly a joint return is not always the smartest approach. Considering your options is worth a second look! Married-filing-separately status requires more effort, because both parties must itemized deductions. However, sometimes married couples are better off filing separately….even if they are happily married! Calculating your taxes both ways will point you in the higher refund direction.
The IRS uses a percentage of adjusted gross income to determine a host of qualified deductions on Schedule A. Filing separately gives each spouse a lower AGI. Hence, certain medical expenses and miscellaneous deductions qualify only when spouses opt to file separately.
Boost your IRA Contribution:
Under current tax law, taxpayers have until April 15 to open or add to a traditional IRA for the previous tax year. That gives you the flexibility of claiming the credit on your return now! Traditional IRA contributions reduce your taxable income. Small business owners and others can take advantage of the maximum contribution and, if you’re at least 50 years old, the catch-up provision, to add to your IRA.
American Opportunity Tax Credits:
Unlike the other education tax credits, the American opportunity tax credit includes expenses for course-related books, supplies and equipment that are not necessarily paid to the educational institution. It also differs from the Hope scholarship credit because it allows the credit to be claimed for four years of post-secondary education instead of two.
This tax credit provides up to $2,500 of the cost of tuition, fees and course materials paid during the taxable year.