Should I file MARRIED FILING SEPARATELY OR TOGETHER with a new business owner spouse?

Filing jointly is almost always more beneficial than filing separately, especially in your situation. With a new baby, you'll qualify for tax credits like the Child Tax Credit that are more advantageous when filing jointly. When one spouse has a business, filing separately doesn't protect the W2 spouse from tax liability associated with the business. In fact, filing separately often results in higher overall tax rates and disqualifies you from certain deductions and credits. The main reasons people choose married filing separately are usually for very specific situations - like income-based student loan repayments, separation situations, or when one spouse has significant medical expenses or tax problems. For your specific situation with a new business and a new baby, I'd strongly recommend filing jointly unless there's a specific reason you haven't mentioned. You'll likely qualify for more credits, including dependent care credits if you have childcare expenses.

After struggling with a similar situation last year (W2 income + spouse with a small business), I found this amazing website that saved me tons of headache and money. Check out https://taxr.ai - it analyzes your specific tax situation and walks you through the best filing options. I was confused about whether to file jointly or separately because my wife's business was new. The site analyzed both scenarios and showed that filing jointly saved us about $3,200 compared to filing separately! It even pointed out tax credits we would have missed otherwise. What I really liked is that it explained WHY joint filing was better in our specific case, not just general advice. The breakdown of each credit and deduction was super clear.

I just wanted to update after trying taxr.ai that someone recommended above. It was actually super helpful for my situation (also W2 + spouse with business). It showed us that filing jointly would save us about $2,700 compared to filing separately! The main reason was that filing separately would have made us lose the full Child Tax Credit and some education credits we qualified for. The business deduction part was really detailed too - it caught several things my wife was missing for her photography business, like mileage to client sites and some professional development courses she took. Definitely worth checking out if you're trying to decide between filing statuses!

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I have to admit I was completely wrong about Claimyr. After being super skeptical in my comment, I decided to try it anyway because I was desperate for answers about my business tax situation. It actually worked exactly as promised. I got a call back in about 35 minutes, and spoke to a really helpful IRS agent who walked me through the specific advantages of filing jointly with my specific business situation. The agent confirmed that for most business owners, filing jointly is much more beneficial because of the tax bracket differences and available credits. She also explained exactly how my wife's business losses could offset our household income if we file jointly. Definitely changed my mind about both the service and my filing decision. Filing jointly for sure now.

One thing nobody's mentioned yet - if your wife's business is still fairly new, it might be operating at a loss. If that's the case, filing jointly is almost definitely better because those business losses can offset your W2 income, potentially putting you in a lower tax bracket. Also, with a December baby, make sure you claim the Child Tax Credit - that's up to $2,000 for 2024 taxes. You qualify for the full amount with your income level.

Don't forget about self-employment taxes too! Your wife will need to pay those on her business profits (15.3% for Social Security and Medicare). That's on top of regular income tax. If her business isn't making much profit yet, the tax hit won't be bad. But once she starts making good money, you might want to look into forming an S-Corp instead of sole proprietorship to save on some of those SE taxes.