Deciding how to file your taxes as a married couple can be tricky. Most people think filing jointly is the best way to go, but that's not always the case. Filing taxes separately when married is another option that can make sense in certain situations, whether for financial reasons, personal preferences, or complex tax scenarios. But how does it work, and is it right for you?
We’ll break down everything you need to know about married filing jointly vs filing separately, the pros and cons, and how to decide which option is best for your situation.
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What does married filing separately mean?
“Married filing separately” (MFS) is a tax filing status that allows married couples to file their tax returns separately, rather than combining their incomes on one return (which is referred to as “married filing jointly” or MFJ). Each spouse is responsible for their own taxes, and they report their income, deductions, and credits separately.
This filing status isn’t as common as filing jointly, but it can be beneficial in specific cases. “Traditionally, filing jointly was more beneficial in one-income households because it gave tax rates and deductions as if both partners were working, but with only one income stream that resulted in much lower overall taxes,” says tax manager Crystal Stranger.
MFS is especially worth considering if one spouse has significant medical expenses, student loan repayments, or other deductions that might not be as advantageous if both incomes are lumped together on a joint return. For example, if you can deduct $25,000 in student loan expenses from an individual income of $75,000, it might yield more tax savings than if you deducted it from a combined income of $150,000.
“I often see the benefit in filing separately on state tax returns with two income households without kids,” Stranger says. “Even though the Federal tax will increase slightly, the state tax will be reduced enough to warrant the married filing separate status.”
Married filing separately: Rules
If you choose to file with a married filing separately status, both spouses must agree to do so—one cannot file separately while the other files jointly. This means you’ll each submit your own tax return, report only your individual income and deductions, and pay taxes on your own earnings.
Plus, there are some important married filing separately rules to keep in mind:
- Standard deduction: The standard deduction is lower for MFS filers than it is for those filing jointly. For the 2023 tax year, the standard deduction for those married filing separately is $13,850 compared to $27,700 for joint filers. While it might seem counterintuitive, the standard deduction for married filing separately is designed to be a single amount for each spouse, not a combined amount. This is to prevent couples from artificially increasing their deductions by filing separately.
- Deductions and credits: Some deductions and tax credits, like the child tax credit and earned income tax credit, are either reduced or completely unavailable to MFS filers.
- Tax brackets: The tax brackets for MFS filers are generally higher than for those filing jointly, meaning you might pay more in taxes on the same amount of income.
Married filing jointly vs separately: Key differences
Understand the differences between married filing separately vs jointly before deciding on your filing status.
- Tax benefits: Filing jointly often provides more tax benefits, including access to a larger standard deduction and more tax credits. Filing separately can sometimes offer more tax savings if one spouse has significant deductions that would be reduced on a joint return.
- Deductions: When filing jointly, you can combine deductions like medical expenses, charitable contributions, and mortgage interest. When filing separately, these deductions are calculated separately, which can be a disadvantage if one spouse’s deductions don’t meet the threshold to claim them.
- Liability: When filing jointly, both spouses are equally liable for any taxes owed or penalties incurred. Filing separately limits your liability to only your individual taxes.
Should I file married filing separately?
Although filing separately may not be the most financially beneficial at times, this can be the safest option for some people. If you're unsure about your marriage or feel unsafe with your partner, filing separately might be wise.
Filing separately can also be wise if you're not sure if what your spouse is claiming on the taxes is fully legal and deductible. “When you sign a tax return you're claiming under penalty of perjury that what you reported there is correct, and a married person can have civil and criminal liability for what their spouse reported on a joint tax return,” Stranger says.
Filing separately in instances like this can protect you from taking on your spouse's liability. “If your spouse is not claiming income from an under-the-table job, hiding cryptocurrency, or refusing to report income earned outside the U.S., then you would want to file a separate tax return as these types of offenses are serious offenses that can have jail time as a result,” the expert says.
To determine whether married filing separately is the best choice for your situation, consider the following:
When married filing separately might be a good idea
There are certain situations where being married but filing separately makes more sense than filing jointly. Here are a few examples:
- High medical expenses: If one spouse has significant medical expenses, filing separately can help you deduct those costs. Medical expenses must exceed 7.5% of your adjusted gross income (AGI) to be deductible. If one spouse has a lower income, it might be easier to meet that threshold by filing separately.
- Student loan repayment plans: If one spouse is on an income-driven repayment plan for their student loans, filing separately can help lower their monthly payments. Joint filers’ income is combined when calculating payments, so separating the incomes could lead to smaller payments.
- Marriage uncertainty: Whether you’re thinking about getting a divorce or don’t want to be tied to your spouse's businesses, there may be circumstances in which you prefer to keep things separated.
When married filing separately might not be a good idea
While there are benefits to married filing separately, it’s not always the best option. Here are a few situations where it might not make sense:
- Losing tax credits: Many tax credits, such as the earned income tax credit, child tax credit, and education credits, are either reduced or unavailable if you file separately.
- Higher tax rates: MFS filers often find themselves in higher tax brackets than joint filers, which can result in a larger tax bill.
- State taxes: Some states have different rules for married couples who file separately, which can complicate your state return or even negate any federal tax savings.
- Income disparity: “If you have a year when one marriage partner makes more money than the other it normally will result in a lower combined tax rate to file jointly,” Stranger says.
- Joint business: “If you have a joint venture business owned by two spouses, and you do not want to file a separate partnership return, then you must file a joint tax return,” the expert says.
Married filing separately: Who claims a child?
What changes if there are kids in the picture? If filing separately, who claims the child? Can you file married filing separately and claim dependents? You can file separately and claim dependents—but there are some key points to keep in mind.
- Only one spouse can claim the child or dependent, and you both must agree on who will do so.
- The spouse claiming the child is eligible for certain tax credits, such as the Child Tax Credit or the Child and Dependent Care Credit, but these credits may be reduced for MFS filers.
- The IRS has strict rules regarding married filing separately claiming dependents, so it’s crucial to ensure the parent claiming the child meets the eligibility criteria, especially if the child lives primarily with one spouse.
If you and your spouse file separately and both try to claim the same child or dependent, this will trigger a red flag with the IRS and could result in penalties or audits. So, communicate and agree on who will claim the child before filing your taxes.
Bottom line
Deciding between married filing jointly vs married filing separately is a personal decision that depends on your unique financial situation. While filing jointly typically provides more benefits, there are circumstances where filing separately can save you money or protect you from liability. Before making a decision, consider all the factors and, if needed, consult with a tax professional to determine which option is best for you.
FAQs
Married filing separately dependents: How to claim dependents when married filing separately?
Typically, only one spouse can claim dependents when filing separately. You’ll need to agree on who claims the children and any associated credits, such as the child tax credit.
Can you file married filing separately if you live together?
Yes, living together doesn’t disqualify you from filing separately. However, the same rules about dependents and deductions still apply.
How does married filing separately affect student loan payments?
Filing separately can reduce your income-driven repayment plan payments, as your payments are based only on your income rather than combined income.
Is there a penalty for married filing separately?
There isn’t a direct penalty for filing separately, but you may lose access to certain deductions and credits, which could result in a higher tax bill.
Married filing separately child tax credit: How does married filing separately affect the child tax credit?
The child tax credit is reduced or unavailable for those filing separately, depending on your income level.