Updated: Sep 04, 2023

When Married Couples Should File Taxes Separately

Is it ever a good idea for married couples to file separately instead of filing jointly on their taxes?
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There are a lot of tax advantages for married couples to file their taxes jointly. Tweaks to the tax code have mostly eliminated what some called a "marriage penalty" in which, under certain circumstances, single, unmarried filers paid less in taxes than a married couple with similar income, and some credits are only available to those who are married and filing jointly. Is it ever a good idea for married couples to file separately instead of filing jointly on their taxes?

Shared benefits

There are some tax breaks married couples are only eligible to claim if they file a combined tax return. Joint filers enjoy claiming benefits such as the earned income tax credit, education expenses, adoption costs, or itemizing some deductions.

Thresholds for the child tax credit vary greatly when filing single versus married. In higher tax brackets, the earned income credit won't apply, anyway, but some of those other deductions could be highly beneficial for joint married filers as deductions play a role in reducing your overall annual earnings, also known as your adjusted gross income, or AGI. The AGI is the amount on which you will be taxed, not your total earnings.

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Income and expense disparities

If one spouse has a lower income and substantial eligible expenses, such as medical bills, or a hefty percentage of itemized deductions like depreciation, it might be advantageous to file separately. A lower income with more deductions may make the separate tax bracket total up to an amount that will require paying less money toward taxes. If one spouse is launching a new business and it comes with a lot of expenses, or has returned to college and can claim credits, filing separately may result in a lower tax burden.

Added protection

Does your spouse work under the table, have problems with record keeping (such as for a small business), or possibly engage in risky tax filing techniques? If any of these are the case, then it's important to discourage them from doing so, but also important to make sure you won't be held liable for their mistakes. Whether it saves money this year or not is less important than avoiding consequences from having your finances entangled in a tax return which might not hold up to the scrutiny of an audit. Play it safe and file singly while prompting your spouse to

Caution: community property states

Some states have additional rules about when married couples can file singly, These states, namely Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, are known as "community property states" and the laws are a bit more complex. Alaska also has enacted a community property provision, but it is elective. For more information, see IRS publication 555.

Go with a pro

The best way to find out the best way to save money on your taxes is to consult with a professional tax preparer. An experienced tax professional can help you navigate the complicated facets of the U.S. tax code. However, many software programs -- online or to install on your computer -- are able to resolve very complex tax scenarios by asking a series of simple questions.

If you are comfortable doing you taxes yourself, do yourself a favor and get a reputable software program and compare both scenarios of filing a joint tax return and separately. Do the math and remember that even if filing one way created an advantage last year, the picture may be different this tax year. With a little extra time and effort, you can squeeze every extra penny out of your return.

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