Question

Bonnie and Jake (ages 35 and 36, respectively) are married with no dependents and live in Montana (not a community property state). Because Jake has large medical expenses, they seek your advice about filing separately to save taxes. Their income and expenses for 2019 are as follows:

Bonnie's salary $42,500 Jake's salary 26,000 Interest income (joint) 1,500 Rental loss from actively managed rental property (23,000) Jake's unreimbursed medical expenses 8,500 All other itemized deductions:* Bonnie 19,000 Jake 6,400 *None subject to limitations

Determine whether Bonnie and Jake should file jointly or separately for 2019.

Bonnie Jake Joint AGI $ $ $ Total itemized deductions $ $ $ Taxable income $ $ $ Tax $ $ $

Answer 1

Bonnie and Jake should file jointly or separately for 2019.
	Bonnie	Jake	Jointly
Salary	42500	26000	68500
Interest Income	$         750.00	$         750.00	1500
Renal Loss			(23000)
Total AGI	$ 43250.00	$ 26750.00	47000
Medical Expenses	$                   -	$ 8500.00	8500
7.5% of Agi		(1143.75)	(3525)
claim		7356.25	4975
Itemized Deductions	$ 19,000.00	$ 6,400.00	25400
total deduction	19000	13756.25	30375
Net Income	$ 24250	$ 12993.75	16625
Taxed at 10% (up to $9700)	$         970	$ 970	1662
Taxed at 12% (above $12750-9700)	$ 1746	395.25
Total Individual Tax	$ 2716	$ 1365.25	1662.5
Tax when file separetly	4081.25
Tax when file jointly	1662.5
saving to file jointly	2418.75

so it is better to tax return file jointly

In 2019, the IRS allows all taxpayers to deduct the total qualified unreimbursed medical care expenses for the year that exceeds 7.5% of their adjusted gross incom

Tax Rate	Single	Married, Filing Jointly
10%	$0 – $9,700	$0 – $19,400
12%	$9,701 – $39,475	$19,401 – $78,950
22%	$39,476 – $84,200	$78,950 – $168,400
24%	$84,201 – $160,725	$168,401 – $321,450

Here we assume that they both live together so rental loss are in jointl.y

Married people who file separate tax returns and live separately for the entire year are each entitled to a $12,500 offset. However, married people who file separate returns and live together any time during the year get no offset at all. (I.R.C. § 469(i)(5)(B).) The tax court held that Julie Oderio did not qualify for the offset because she didn’t live apart from her husband Jason for the entire year. So filing separately cost her a $25,000 deduction.