Most married taxpayers are better off filing jointly, but you may want to file separately in certain circumstances.
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Dear Tax Genius,
My partner and I got married this past year, so we’re preparing our first tax return as a married couple. I noticed there are two options for married people, so when does it make sense to file as married filing jointly vs married filing separately?
- Pandemic proposer
Dear Pandemic proposer,
Getting married is a joyous occasion, but it can definitely make taxes confusing as you go from filing your own returns to a joint one. Here’s the short answer: Married couples usually benefit most from filing a joint tax return. There aren’t many situations when a couple should definitely file separate returns.
In fact, the U.S. tax code often favors married couples who file jointly. They have access to more tax breaks than couples filing separately, higher income limits for many credits and deductions, and higher income brackets for lower tax rates. Many of these benefits are also available even if one spouse doesn’t work or has little to no income.
Currently, there are really only a handful of situations where filing separately is the best option for a married couple: you’re separated from your spouse and qualify as head of household, you want to maximize your itemized deductions, or you want some legal and financial protection from the tax information your spouse is reporting. There are certainly other situations where the married filing separately filing status can make sense, especially if you and your spouse are truly separated, so consider talking to a tax professional or financial advisor if you need more help.
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Most married couples can save more on their federal taxes by filing a joint income tax return. This is especially true if you’re planning to claim the standard deduction. If you need more convincing, here are some reasons you should file jointly instead of separately:
Separate filers lose access to many deductions and credits.
You may pay a higher tax rate.
Access to individual retirement accounts is limited.
Filing separately can complicate state returns.
In some cases, using the married filing separately tax status makes you ineligible for tax deductions or credits. Here are just five credits and deductions you can’t claim if you file separately:
The earned income tax credit
The credit for child and dependent care expenses
The adoption credit (in most cases)
Even for deductions and credits that separate filers still have access to, the maximum income they can have while still being able to claim that tax benefit is usually much lower, like just $10,000.
Increase your tax knowledge: above-the-line vs below-the-line deductions
The federal income tax rates you pay are based on your filing status and your income. The income thresholds that apply to each tax bracket are lower for married individuals who file separately than for joint filers. This is especially noteworthy for a married couple where one spouse has a six-figure income and the other spouse has a much lower income.
For example, a separate filer with an adjusted gross income (AGI) of $100,000 for 2020 would pay a top tax rate of 24% and potentially pay about $15,100 in federal income tax for the year. Joint filers with $100,000 of combined income would pay a top federal tax rate of 12% and potentially pay about $8,600 of income tax. This couple would need to have income of about $132,000 to owe tax equivalent to what the separate filer in this example would owe.
Take a deeper look at all the income tax brackets.
If you want to save for retirement outside of your employer, you can open an individual retirement account (IRA) as long as your income is within certain limits. The maximum income a joint filer can earn while qualifying for a full traditional IRA contribution in 2021 is $198,000. The maximum income at which a separate filer can make the full IRA contribution is $10,000 in 2021.
Filing separately may be even trickier for state tax returns than for federal tax returns, depending on your situation and where you live. In particular, things can get weird in community property states since your state regards income, property and other assets as jointly owned. It may be best to work with a tax professional if you’re in one of those states.
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There are a few main situations when a married individual should consider using the married filing separately filing status:
You’re separated and qualify as head of household.
You have significant itemized deductions.
You’re concerned about your spouse’s finances or debt.
If you think any of these applies to you, you may want to fill out your tax return as a joint and separate filer to see which would save you the most. I know this sounds like a pain, but it likely isn’t too difficult if you use one of the best tax filing services or work with a tax preparer.
If you and your spouse were separated for the last six months of the year, you had a qualifying dependent who primarily lived with you, and you paid most of the care costs for that dependent, you may qualify to use the head of household filing status. Choosing the head of household status instead of married filing separately can have multiple advantages. Heads of household have a higher standard deduction, the income limits for many deductions are higher, and the maximum value of many deductions and credits is higher, especially for the earned income tax credit (EITC).
Learn more about managing taxes during a divorce.
If one or both spouses have significant itemized deductions that they wouldn’t be able to claim all of on a joint return, then filing separate returns may be an option. However, it’s important to remember that if a couple files separately and one person itemizes, the other spouse must itemize too. So even if one spouse is able to claim a higher value for one or two itemized deductions by filing separately, the combined tax savings could very well be greater if the couple files jointly.
Learn more about who can itemize deductions.
Two notes for people trying to itemize:
The medical expense deduction is available for unreimbursed medical expenses worth more than 7.5% of your 2020 AGI, so having a high joint income may limit how much you can claim.
After the 2017 tax reform, the maximum SALT deduction is $10,000 for joint filers, heads of household, and single filers, but $5,000 if you are married filing separately. It may still be worth filing a separate tax return, especially if one of you wants to deduct sales tax and the other is trying to deduct income taxes.
For those who are curious, we used IRS data to look at who actually benefited from the 2017 tax cuts.
You may want to file separately if you’re trying to protect yourself from a spouse’s suspicious financial situation. You aren’t liable for the information on your spouse’s return if you file separate returns. For example, consider filing separately if you think your spouse is evading taxes or attempting to commit tax fraud; if your spouse undergoes an IRS audit, you aren’t subject to an audit. Similarly, you may want to file separately if your spouse has debt that’s subject to either refund seizure or an income-based payment plan, as with some student loans repayment plans.
Fun fact: If you alert the IRS to violations of tax law, you may receive a whistleblower award, which is deductible. Here are 52 other deductions and credits you may not have known about.
At the same time, if your spouse did something suspicious with their finances or even just accidentally underreported their income, the IRS offers protection through innocent spouse relief, under certain conditions.