Here is an example of how filing taxes using "married filing separately" status may result in the best outcome.
While this is rare, it does work out best this way in some cases.
David and Sarah normally file taxes jointly, and live in Israel. David is a US citizen, and Sarah is not, but she filed a 6013(g) election in order to file jointly.
David works part time while he attends medical school, and Sarah is a teacher. They have two children under 17 who qualify for the child tax credit.
David's income is $13,000 and Sarah's income is $50,000. Jointly, the income is $63,000.
As a mother of young children, Sarah is eligible for a substantial Israeli income tax credit, and she did not pay any Israeli income taxes. No foreign tax credit can be taken. David, due to his low income, did not owe any Israeli income taxes, either.
After accounting for US income taxes, their child tax credit refund comes out to only $393.
However, if they file separately, their refund turns into $1589. How did this happen?
David will claim the children as dependents, and his refund comes out to $1589. No US income taxes are deducted from the credit, due to his low income.
Sarah files with no dependents, but claims the foreign income exclusion, reducing her US income taxes to $0. Net gain for filing separately vs. jointly: $1196.
If she would have filed this exclusion while filing jointly, they would have been completely ineligible for the child tax credit refund. That's why filing separately is key to this strategy.
While I had to charge an additional fee for the extra work, it still worked out well worthwhile for them to file separately.
This example shows how DIY filing may be a false economy. Having a pro do your taxes ensures the best possible outcome.
Comentarios