While “married filing taxes jointly” refers to a single return, “married filing separately” means you and your spouse each file separate returns with your own income, credits, and deductions.
The bride and groom use pinky fingers to each other with sunset background. (Photo: iStock Photo)
Key Points
- Annually, married couples can choose to file their income taxes jointly or separately.
- While filing taxes jointly is more common, there are some situations where filing separately may provide a larger tax break.
- Experts warn that there are trade-offs to consider when filing taxes separately.
Every year, married couples have the option of filing their taxes together or separately. While the tax code generally favors joint returns, experts say there are some situations where filing separately pays off.
“Approximately 95% of married couples file taxes jointly,” said Or Pikary, a certified public accountant and wealth advisor at Mariner Wealth Advisors in El Segundo, California. However, couples must crunch the numbers to determine which option is best.
“A number of factors contribute to this decision,” said Sheneya Wilson, CPA and founder of Fola Financial in New York.
According to experts, the following are some situations in which married filing separately may make sense.
Joint filers typically have lower income requirements for tax breaks, like the deduction for IRA contributions. If you’re married and file separately, you might have a higher tax rate and pay more tax might have a higher tax rate and pay more tax if you’re married and file separately. If you have a lot of out-of-pocket medical expenses, filing separately might be advantageous.
You have a repayment plan for your student loan that is depending on your income.
With a student loan repayment plan that is based on the student’s income, your monthly payment is calculated based on your gross income after adjustments, which is usually higher when filing taxes jointly.
According to Pikary, this is one scenario in which filing separately may make sense than filing taxes jointly. However, you must consider the other disadvantages of filing apart.
You wish to keep your financial affairs separate.
Some couples, whether happily married or divorcing, prefer to keep their finances and tax contributions separate, according to Wilson.
For instance, one spouse may be a business owner who pays taxes quarterly, while the other spouse has taxes deducted from each paycheck. “They may want to split the tax liability between the spouses,” she speculated.
You want to take advantage of as many itemized deductions as possible.
When filing your taxes, you choose between the standard deduction and itemized deductions, whichever is greater.
The standard deduction available to married couples who file their taxes jointly in 2022 is $25,900, making it difficult to claim tax breaks for charitable gifts, medical expenses, state and local taxes, and other expenses.
However, the standard deduction for single filers is $12,950, which Wilson believes is more easily exceeded. Filing separately may make sense if both spouses have significant itemized deductions while still earning less than $25,900.
There is one caveat, however: you cannot mix and match, according to Pikary. On their separate returns, both spouses must itemize or take the standard deduction, which may not provide equal benefits.
The disadvantages of filing separately
While filing separately may appear to be the better option in some cases, there are other trade-offs to consider.
Separate filers, for example, typically are unable to contribute to a Roth individual retirement account because the changed adjusted gross income limit is $10,000.
As per the Pikary, the IRS also restricts or prohibits other write-offs for separate filers, including the student loan interest deduction, the earned income tax credit, and tax credits for higher education.
He continued, “If you go that route, you could be missing out on potential tax savings,” emphasizing that it’s crucial to conduct an analysis in both directions to determine the optimal option.
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