Should married persons choose “joint assessment” or “separate assessment”? Which one is more tax efficient?

In recent months, many people have received tax returns one after another. Married persons can consider choosing to file tax returns by “joint assessment”, which may get better tax benefits depending on the circumstances. What are the benefits of joint assessment? When should it be used? The following articles will answer with examples:

What is separate assessment?

Couples can choose to be assessed separately. In this case, married persons with salaries taxable income, or their spouses, can be assessed separately using their separate individual status. The two still have to declare their own income and can complete a tax return on the premise of claiming expenses and deductions.

If the spouse or the other party has no salaries taxable income, one party will still be entitled to the “married person” allowance, and should not choose the “joint assessment” option.

At the time of tax assessment, the tax payable by one of the parties has nothing to do with the income of the spouse, and the assessor will issue a notice of assessment to both parties separately.

What is joint assessment?

However, it should be noted that the joint assessment option is not permanent. If you want to choose joint assessment every year, the taxpayer must re-apply the application every year.

If you want to make a combined assessment, remember to apply within the current year of assessment or the next year of assessment, or within 1 month after the assessment becomes final. The Commissioner of Inland Revenue may extend this time as the case may be. Restriction; if joint assessment is deselected, joint assessment cannot be selected again for the same year of assessment.

After the combined assessment, they will only receive one notice of assessment. If the Inland Revenue Department finds that the combined assessment is not conducive to tax reduction after calculation, the assessor will issue separate notices of assessment to them.

Is separate or combined tax assessment better? Take a look at the following examples

Assuming that in this year of assessment, the monthly incomes of Mr. and Mrs. Chen, who have one daughter, are $45,000 and $10,000 respectively, what is the difference between the separate tax returns and the combined tax returns?

If two people file a “separate assessment” tax return:

• Mrs. Chan’s income ($120,000) is lower than the basic allowance ($132,000), so she does not have to pay tax this year;

• Mr. Chen’s income ($540,000), after calculating the basic allowance, child allowance, and this year’s 100% tax reduction (capped at $10,000), the tax payable is $17,900.

If two people file a joint tax return:

• After adding up the income of the two ($636,000), deducting the married person allowance, child allowance, and this year’s 100% tax reduction (capped at $10,000), the tax payable is only $14,840.

It can be seen that the combined tax return method will save the two persons $3,060 in tax, which is relatively advantageous in this situation.

Worried about wrong combined tax assessment? The Inland Revenue Department will follow up

Taxpayers can use the Inland Revenue Department’s “Tax Calculator” to assess whether joint assessment should be adopted, so as to estimate the tax payable by the two and provide support and assistance to taxpayers who are concerned about erroneous joint assessment.

However, even if the “tax calculator” is not used to measure the tax payable, the taxpayer does not need to worry too much about the unfavorable situation of the tax assessment, because if the Inland Revenue Department finds that the combined tax assessment is unfavorable to the taxpayer, the tax assessor will A notice in the Notes column of the tax notice will also suspend the processing of applications.

The authorities will automatically make comparisons and recommend taxpayers to apply for the most favorable option. Married taxpayers do not need to worry too much about paying too much tax.

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.