The married filing separately status is suitable for married high earners or those with a partner with prior tax complications. If you’re just entering a marriage (or just exiting one), filing separately can be a smart choice.
Married filing separately filers are subject to different tax brackets than single filers, and both spouses must agree on the status. It’s worth noting that this status can lead to complications in determining which deductions each spouse should claim.
Filing separately often results in higher tax payments than filing together due to restrictions on deductions and credits. These restrictions impact deductions for student loan interest, the Earned Income Tax Credit, child and dependent care expenses credits, and more.
However, filing separately has potential advantages, like reducing monthly payments for individual income-based student loan repayment plans.
It may also make sense to file separately when one spouse has significant out-of-pocket medical expenses that would be ineligible for deduction (either wholly or partially) if you filed together.
Married filing jointly vs separately
When deciding whether to file taxes jointly or separately as a married couple, the choice depends largely on your circumstances.
Married filing jointly is often the most beneficial in terms of tax savings. This filing status offers a higher standard deduction, access to certain tax credits, and more favorable tax brackets. Couples who file jointly can potentially deduct a larger amount of their income and qualify for various tax benefits that aren’t available to those who file separately.
With that said, married filing separately can also be advantageous in specific situations:
- When one spouse has significant student loan debt under an income-driven repayment plan, filing separately could result in lower monthly loan payments, as the payment would be based solely on their income, not the combined household income.
- When one spouse has substantial medical expenses, miscellaneous itemized deductions, or other individual deductions that would be limited by a higher adjusted gross income.
- If there’s a need to separate tax liabilities, like when one spouse has concerns about the accuracy of the other’s tax return, or there are unresolved tax issues.
- If you’re separated but not yet legally divorced and your finances are being managed separately.
Still, filing separately often leads to a higher tax bill overall. Restrictions on tax credits, deductions, and benefits – like the Earned Income Tax Credit, education tax credits, and child and dependent care credits – should play a significant role in your decision.
