Depending on your situation, Married Filing Separately could actually be the right filing status for you
Whether you’ve been married for decades or recently tied the knot, you probably share just about everything with your spouse. Bills, chores, children (or maybe just a pet), a house, the list of what couples share goes on and on.
Should what’s mine is yours, and what’s yours is mine also apply to your tax return?
For most couples, filing jointly means more tax incentives. However, this filing status isn’t for everyone. In fact, there’s reasons why filing separately may be a better idea.
When it’s a Good Idea to Choose Married Filing Separately
In most cases, you’ll find that filing a joint tax return ends up saving you and your spouse money. However, there are certain situations that when filing separately ends up being the better option. Below are eight reasons to file separately;
1. You have a large amount of Medical Expenses: In order to qualify to deduct medical expenses, they have to total more than 10% of your Adjusted Gross Income (AGI). That means, if your filing jointly and your Adjusted Gross Income as a couple is $110,000, then the total of your medical expenses has to be at least $11,000. However, if your AGI is $40,000, and your spouse’s is $70,000, then when married filing separately, you could deduct your medical expenses as long as they are at least $4000.
2. You’re Reporting a Long List of Employee Business Expenses: Like medical expenses, qualifications to report employee business expenses, such as mileage on your tax return is directly linked to your income. To deduct employee business expenses, they must total at least 2% of your income. In other words, this 2% will be a much larger number when taking into account your spouse’s income in addition to your own.
3. You’ve Faced Casualty Loss: Whether you’ve faced damage to your car or home from a storm, your home was burglarized , you’ll only be able to deduct your loss if the portion uncovered from homeowners’ insurance is more than 10% of your income plus $100.
4. You earned Capital Gains and Dividends: If you earned capital gains and dividends and your spouse makes significantly more than you, you’ll be taxed at a lower rate if selecting to file separately.
5. You want to Legally Protect Yourself: If you know or have a feeling your spouse is up to something shady relating to his/her income and how it’s being reported, it’s best not to sign a tax return. Signing your name on a joint tax return indicates that you are taking legal responsibility for your own tax situation as well as your spouses. If you know your spouse is cheating on their tax return (or you have a feeling about it), filing separately means you’ll avoid being legally tied to fines and penalties from the IRS.
6. Your Spouse Owes the Government Money: If your spouse hasn’t paid his/her student loans, have unpaid government loans or overdue tax returns, then the government may hold onto your tax refund if filing jointly.
7. You’re Getting a Divorce (or plan to): If you’re going through a nasty divorce, then it’s best to go your own route, even if it means you may end up paying more in taxes. Some divorce proceedings can involve splitting tax refunds, and filing jointly means you’ll have to meet up to sign the paperwork. You can avoid the drama by filing separately.
8. You Want to File As Head of Household: If you and your spouse didn’t live together for the last six months of the year, and you maintained a home for your child for more than half the year, you may be able to claim the Head of Household filing status. This status means your standard deduction will be higher and you’ll be able to claim certain credits you otherwise wouldn’t be able to if filing jointly.
If you find yourself within one of the eight categories above, you may want to reconsider filing jointly. Married Filing Separately is definitely the less common filing status among couples but there’s obvious reasons why it could end up being the smarter option.
Compare Filing Separately to Filing Jointly with RapidTax
Sharing is caring. However, certain things are better left unshared, like toothbrushes and sometimes even tax returns!
If you’re unsure how to file, you can compare the two. First, create an account on RapidTax and prepare your return with the married filing separately status. Then, you (or your spouse) can create a separate RapidTax account and prepare a joint return. Before paying, you’ll be able to view what your federal refund or tax due will be for each filing status. Then, you’ll simply complete the tax return with the better result!
Photo via Mike Licht on Flickr
Hi:
I am filing married filing separately. We have dividends and capital gains on our joint accounts. How to allot these?
Is 50/50 required or I can do any way I like.
I recently got married and wanted to know whether to file jointly or separately. We still have separate bank accounts and my driver’s license still shows my old address because I haven’t had time to change it yet. My husband inherited some money BEFORE we were married, which definitely bumped him into the next tax bracket, will I be penalized for that now that we’re married and if so should I file as married filing separately then? Please advise. Thanks for your help!
Hi Katy,
It is typically more financially beneficial for spouses to file jointly. However, in your case, since your husband has been bumped up to the higher tax bracket with his inheritance, filing jointly will bump you up as well. That being said, if it is a significant amount that he has inherited, it may be more beneficial for you to file separately.
Married filing separately is not the same as filing as a single person—it means that you’re married, but you each file your own return, so you don’t take legal responsibility for your spouse’s return, and your incomes and expenses are considered separately.