Spouses and Liability for taxes – a digestible overview – My blogs as of late have focused on family liability and how it affects spouses, parents, children and even third parties. Since it is tax season, I figured now is as good a time as any to discuss how liability comes into play when you file your federal income tax.
First, a brief disclaimer: tax laws are complex and constantly changing. This blog is meant to provide an overview, and that’s all. Please consult with a tax attorney or CPA to discuss your specific filing questions.
Now for the overview.
For newlyweds out there who may not know, liabilities do exist beyond your own individual tax return when you are married. Even if you and your spouse each have a job, you are generally each liable for not only your own income when you file, but also one-half of all community income. We will get into what “community income” means in a minute, but it’s also worth noting that liability may increase or decrease depending on your filing status.
There are three ways you can file a federal income tax return:
- Married, filing jointly – This is when spouses fill out a single federal income tax return with all income included, and it is the most common way to file. Both spouses are jointly liable for the full amount of taxes due on their combined incomes, even if the income was completely earned by one spouse.
- Married, filing separately – Spouses can file separate returns, and in doing so, a spouse is personally liable for the federal income tax on that return. However, because Texas is a community-property state, each spouse is still liable for one-half of the community income and for any separate income earned by that spouse. For example: if one spouse has a salary of $100,000 and the other has a salary of $50,000, each spouse is liable for federal income tax on $75,000 (one-half of $150,000).
- Filing as head of household – A spouse can only file as head of household if that person’s spouse was not a member of the household for the previous six months, the household is the primary residence for a child whom the taxpayer is entitled a dependency exemption, and if the taxpayer furnished over one-half of the cost of maintaining the home. If these requirements are met, the spouse filing for head of household will not have to report the other spouse’s earnings. The other spouse will file separately.
There are pros and cons to filing in any one of these three ways, and again, I urge you to consult with a qualified tax attorney or CPA. Nelson Law Group, PC has relationships with various experts that can help you along the way. Give one of our team members a call today.