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Married Filing Separately: When Does it Make Sense?

For most married taxpayers, filing jointly with a spouse means a larger standard deduction, more access to credits and other individualized deductions, and an overall simpler return. However, married taxpayers also have the option of filing a separate tax return from their spouse. But why would you choose to file separately, and how should you decide which filing method will garner the biggest refund? Use our guide to determine the best filing status for you and your spouse’s individual circumstances.

Overview: Married Filing Separately vs. Jointly

Filing a joint tax return with your spouse can offer big financial benefits for both of you. The IRS grants one of the largest deductions to married couples, the standard deduction. For taxes filed by April 15th, 2019, married couples filing jointly, who choose not to itemize their deductions, may deduct $24,000 from their taxable income, no questions asked.

When you file your taxes jointly, you submit one return to the IRS. There is no way to distinguish between you and your partner’s income after you’ve filed a joint return. Instead, you will pay taxes on your household income, which is equal to the total amount of money you and your spouse made in the taxable year.

As a general rule, the bigger the difference between you and your spouse’s income, the less you will pay as a couple in taxes. This is because you’ll only have to pay one, slightly larger percentage on your household income instead of paying twice with a slightly lower percentage.

When you file a separate tax return from your spouse, you will usually pay more in taxes. You will also lose access to certain credits and deductions. However, if you itemize your own deductions or take the standard deduction, you will not be held liable for anything your spouse puts on his or her return.

To learn more about filing a joint tax return vs. a married filing separate return, check out this short video from TurboTax:

When Should You Consider Filing Separately?

When you’re itemizing your deductions

When you file your taxes, you have the option of taking a standard deduction or itemizing your deductions. When you itemize your deductions, you’ll need to add up each individual expense and take them as a gross deduction from your income. Itemized deductions are commonly used by independent contractors and business owners who have to mitigate costs associated with traveling for business or producing product. The standard deduction for a married couple filing together is significantly higher than the standard deduction that can be claimed by an individual filing independently.  

For 2018, single filers may deduct $12,000 and married couples filing jointly may deduct $24,000.

When you file jointly, it’s only beneficial to itemize deductions when your expenses are greater than $24,000. If both you and your spouse have significant itemized deductions, you both can often lower your tax brackets and pay less in taxes filing separately than you would if you filed jointly. Run the numbers, compare budgets, and make sure that each spouse has more than $12,000 in deductions to claim; if one spouse itemizes, the other must do so as well.

When you have an income-driven student loan repayment plan.

If you or your spouse are on an income-driven student loan repayment plan, and one of you makes significantly more money than the other, filing separately can help secure lower monthly payments for the coming year. Keep in mind that lower payments can also cause you to accrue more interest over time, and filing separately excludes you and your spouse from taking advantage of certain education-related credits and deductions.

When you or your spouse owes taxes or debts to the state.

If you or your spouse owes back taxes or certain court-ordered debts (like child support payments) and you file together, these costs will be deducted from your refund. If your spouse owes outstanding payments, and you’d like to protect your refund, you should file separately.

When you’re concerned that your spouse may be dishonest on his or her taxes.

When you file your taxes together, you both are liable for everything written on the return you submit. If you have a suspicion that your spouse is not being completely honest on your tax return, you may be held liable should the IRS notice any discrepancies. Bring up the cost of penalties with your spouse and point out where you believe he or she is not following the tax code. If you can’t convince them to change the return, consider filing separate tax returns to protect yourself both legally and financially.

When you’re technically married but want to keep your finances separate.

If you and your spouse are in the process of getting a divorce or are separated, you probably want to file separate tax returns. That way, you won’t have to deal with the IRS should your partner make a mistake on his or her return.

What You Will Lose by Filing Separately

If you file a separate tax return from your spouse, you will both lose access to a number of credits and deductions, regardless of being eligible to claim them had you filed a joint return.

If you file a separate return, you will lose (or severely limit) your ability to claim the following credits and deductions, amongst others:

  • The Earned Income Credit
  • The Adoption Credit
  • The Child and Dependent Care Tax Credit
  • The Student Loan Interest Deduction
  • The American Opportunity Credit and Lifetime Learning Credit
  • The deduction of net capital losses
  • Traditional IRA deductions

The combined benefits of these deductions can result in thousands of lost dollars if you don’t claim them. Carefully consider your unique tax situation before deciding to file a separate return.

How to File a Married Filing Separately Return

If you decide to file a separate return from your spouse, the process is very similar to the one used to file taxes when you were single. You have two choices when it comes to filing your taxes: you may file using a tax software program, or you may file by-hand using the forms provided by the IRS. If you’re considering doing your taxes by hand, make sure to check out our guide on how to file your own taxes before making the massive time commitment of filing without software assistance.

If you are using tax prep software to file, you’ll need to indicate your filing status before you complete and submit your return. Most tax software will ask how you’d like to file fairly early in the process. This is because your filing status largely dictates which credits and deductions you’re eligible for.

For example, if you’re using TurboTax, you’ll first be asked if you are married, and then whether or not you are filing together with your spouse. If you answer “no” to this question, the software will automatically begin your return under the married filing separately classification. If you have incorrectly answered “yes” to this question, complete your return, then scroll to the top of the program and click “Personal info.” Then, click the “edit” button to change your status from married filing jointly to married filing separately.

Though the specifics of how to edit and file your return depend upon the individual software program you’re using, most tax software now employs the interview-style questionnaire and follows a similar process to TurboTax.

If you file separately and then change your mind and decide to file jointly, you will need to submit an amendment to your filing status directly to the IRS using Form 1040X. The IRS is currently not equipped to handle electronic submissions of this form, so you’ll need to print it out and mail it in by hand.

Though your tax software may have the form loaded into its program, you will still need to print the form and mail it in after it has been filled out. Note that you can only change your filing status from separate to joint; you may not amend your return to separate after it has been submitted. If you’re submitting an amendment, you should also consider submitting a tax extension.

Final Thoughts

Though selecting your filing status is important, choosing the right tax prep software is one of the best steps that you can take to limit your tax liability and get more money in your return. If you still aren’t sure how you should file, learn how to file a tax extension and consult with a CPA. An individual consultation will allow you to see firsthand what credits and deductions you and your spouse are eligible for, and will help you determine if filing separate returns is worth it.

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