When preparing your tax return, you are often given choices on how to treat a certain situation or item. For example:
- Spouses can file jointly or separately.
- Claiming an “above-the-line” deduction for tuition and fees or an education tax credit.
- Itemizing your deductions or claiming the standard deduction.
- Deducting state and local income tax paid or state and local sales tax paid.
If you find yourself faced with choices you should review each option and do separate tax calculations to see which one will result in the lowest tax.
You should also consider how the option you select on the federal return will affect your resident and non-resident state and local tax returns. Choosing an option that will save you $50 in federal income taxes but cost you $100 in state income taxes isn't a smart choice.
In New Jersey, where I practice, it is often better for married couples to file separately. However, you usually must use the same filing status on your state return as you do on your federal 1040. Do separate federal and state calculations for joint and separate filing and determine the overall tax savings or additional tax cost.Your goal is to choose the options that will allow you to pay the absolute least amount of combined overall federal, state and local income taxes.
—New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.