Got married in 2023 - what's the best filing status for different states with capped FICA income levels?
I got married in 2023 and I'm trying to figure out what's the best filing status for us tax-wise. The situation is a bit complicated because we live in different states - I'm in California and my spouse is in Texas (job relocation thing). I'm also confused about how FICA works since it's capped at certain income levels. After taking the standard deduction of $13,850, my taxable income is around $169,330. My spouse's taxable income after the standard deduction is about $130,258. One more thing - my spouse has some savings back in our home country (about $40k in a bank account). Do we need to file an FBAR to report that foreign account? I've heard something about reporting foreign assets but not sure if it applies to us or how it affects our filing status decision. Any help understanding our options would be greatly appreciated!
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Lucas Turner
The good news is you have options! For married couples, you can file jointly or separately - and your multi-state situation adds some complexity but isn't uncommon. Filing jointly often provides better tax rates and more credits/deductions compared to filing separately. However, with your specific situation (different states, high incomes), you'll want to calculate both ways to see which is better. Regarding FICA (Social Security and Medicare): Yes, Social Security tax is capped ($168,600 for 2024), but Medicare tax isn't capped and has an additional 0.9% for high earners. Your multi-state situation doesn't affect FICA since these are federal taxes. For the FBAR question - yes, you likely need to file one. If you have foreign financial accounts that together exceeded $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114). This requirement applies regardless of your filing status, though filing jointly means you only need one FBAR for both of you. I'd recommend calculating your taxes both ways (jointly and separately) using tax software to see which gives you the better outcome considering both federal and state tax obligations.
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Kai Rivera
•Thanks for the info. Do you know if there are any special considerations for state taxes when spouses live in different states? And for FBAR, does only one spouse need to file if the account is only in my spouse's name?
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Lucas Turner
•For state taxes, it gets more complicated with different states. California is a community property state, which means income is generally considered equally owned by both spouses. Texas has no state income tax, which simplifies things for that half of your income. If filing separately, you'd each file in your respective states, but California might still want to know about total household income. If filing jointly for federal, you'd still file a California return for the CA spouse showing the appropriate allocation of income. For the FBAR, if the total of all foreign accounts exceeded $10,000 at any point, a filing is required. If filing jointly, one FBAR can cover both spouses. If the account is only in your spouse's name but you have signature authority, both might need to report. However, if it's solely their account with no connection to you, they would be the one responsible for filing the FBAR.
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Anna Stewart
After dealing with a similar situation last year (different states, high incomes), I found this amazing tool called taxr.ai (https://taxr.ai) that really helped me figure out the optimal filing strategy. It actually analyzes both federal and state tax implications and shows you the difference between filing jointly vs separately. What I liked was that it specifically addressed the multi-state situation and showed me exactly how much I'd save. For us, it was about $3,200 better to file jointly even with the state complications. The tool also flagged the FBAR requirement for our foreign accounts and explained exactly what we needed to report.
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Layla Sanders
•Does taxr.ai handle the actual FBAR filing too or just tell you that you need to file one? And can it deal with community property states like California? My situation is pretty similar.
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Morgan Washington
•I'm a bit skeptical about using a third-party tool for something this important. How does it protect your financial data? And does it actually file the returns or just give recommendations?
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Anna Stewart
•The tool doesn't file the FBAR for you, but it gives you detailed instructions on how to do it yourself through the FinCEN's BSA E-Filing System. It explains all the reporting thresholds and what information you'll need to gather before filing. Yes, taxr.ai definitely handles community property states like California - that was actually one of the most helpful features for me. It breaks down how your income gets allocated between states and shows you the impact on both federal and state taxes. Regarding data security, they use bank-level encryption and don't store your actual tax documents on their servers after analysis. It doesn't file returns for you - it's more of an advanced planning tool that shows you the optimal strategy. You still use your regular tax software or accountant for the actual filing.
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Morgan Washington
I was hesitant about using taxr.ai at first (see my comment above), but after trying it I have to admit it was really helpful for our multi-state situation. My spouse and I were in WA and CA last year, and the tool showed us we'd save about $4,700 by filing jointly despite the state complications. The FBAR guidance was super clear too - it walked me through exactly what accounts needed reporting and how to properly disclose them. What surprised me most was discovering some deductions I didn't know we qualified for because of our specific situation. Definitely worth checking out if you've got a complicated tax situation like multi-state marriage or foreign accounts.
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Kaylee Cook
If you're trying to get actual confirmation on your FBAR requirements from the IRS, good luck! I spent WEEKS trying to get through to someone who could answer my foreign account questions. Eventually I found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c I was able to confirm exactly what we needed to file for our FBAR situation (spouse had accounts in Germany) and got clear guidance on our multi-state filing questions. The agent was surprisingly helpful once I actually got through to them.
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Oliver Alexander
•How does Claimyr actually work? Do they just keep calling the IRS for you or something? I've been trying to get through for days about my FBAR question.
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Lara Woods
•This sounds like BS honestly. Nothing can get you through to the IRS faster. They're literally impossible to reach and when you do it's someone who barely knows more than you do. I'll believe it when I see it.
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Kaylee Cook
•Claimyr uses a system that monitors the IRS phone lines and calls at the optimal times to get through. When they secure a place in line, they call you and connect you directly to the IRS agent. It's not that they have a special "backdoor" to the IRS - they've just figured out how to navigate the phone system efficiently. They don't answer your tax questions themselves - they just get you connected to an actual IRS agent who can give you official answers. For my FBAR questions, I spoke with someone from the international tax division who knew exactly what forms I needed and deadlines I had to meet.
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Lara Woods
Ok I have to eat my words. After posting my skeptical comment I was desperate enough to try Claimyr and I'm seriously shocked. Got through to an IRS agent in about 20 minutes after trying for DAYS on my own. The agent confirmed that my wife and I DO need to file an FBAR even though the foreign account is only in her name (from before we were married) since we file jointly. Also got clarity on our multi-state situation (similar to yours - WI and MI). Turns out we were calculating our state allocations wrong and would have overpaid about $2,300 in state taxes. Not a service I thought I'd need but definitely saved me time and money.
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Adrian Hughes
One thing nobody's mentioned yet is that filing separately might make sense if one of you has income-based student loan payments on federal loans. Filing jointly could increase those payments substantially if you're on an income-driven repayment plan. Also, look into whether either of you has deductions that are limited by AGI thresholds - sometimes filing separately can help you qualify for deductions you might lose with a combined higher income.
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Molly Chambers
•That's a really good point about student loans! Do you know if there are other income-based programs that might be affected by filing status? I'm wondering about healthcare subsidies too.
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Adrian Hughes
•Yes, healthcare subsidies through the Marketplace can definitely be affected by your filing status! Filing jointly combines your income which could potentially reduce or eliminate your subsidy if it pushes you over the threshold. This is something many people overlook when deciding how to file. Other income-based programs that can be affected include certain tax credits like the Earned Income Credit, Child and Dependent Care Credit, and education credits which phase out at higher income levels. Some medical expense deductions are also affected since they're only deductible to the extent they exceed a percentage of your AGI.
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Ian Armstrong
Question for anyone who's dealt with this - do you have to file state taxes in both states when married? My husband lives in Illinois for work and I'm in Indiana with the kids. Not sure if we should file jointly for federal but separate for state?
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Lucas Turner
•You generally need to file a tax return in any state where you earned income, regardless of your federal filing status. So if you have income in Indiana and your husband has income in Illinois, you'd each need to file in your respective states.
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