Most married couples file a joint tax return, but did you know that you can file separate returns even if you are married?
The IRS rules allow you to choose your filing status at tax time, so you can select the status that works best for your situation. In most cases, filing a joint income tax return makes the most sense for couples.
Joint returns provide many benefits, but filing separately can sometimes be a good idea. It can sometimes lead to more significant tax credits or a larger tax refund.
So, when does it make sense for you and your spouse to file separate returns? Keep reading, and we will tell you everything you need to know about filing separate tax returns, including when it might be a good idea for you.
Income Tax Filing Status Options
There are five different filing status options that tax filers can choose from. You can choose whichever option fits your situation and even change it from one tax year to the next. Here are the different options and some details about each.
Single
This one is pretty self-explanatory. The single filing status is for unmarried individuals. It can also apply to individuals not fitting into the other categories. Even if you have gotten married since the end of the tax year, you must still file as single if you were not married on the last day of the tax year.
Married Filing Jointly
This is the most common filing status for married taxpayers. Filing jointly means the spouses combine their incomes and credits on their return. Filing jointly also allows couples to take advantage of multiple tax credits, such as the child tax credit, earned income tax credit, child and dependent care credit, American Opportunity credit, lifetime learning credit, IRA deductions, and many other tax deductions and exemptions.
Married Filing Separately
Can married couples file taxes separately? Absolutely! This filing status is for married couples who want to file individual tax returns. While this is not extremely common, there are some situations when this is a good idea. Filing separate income tax returns usually leads to a higher tax bill, but that is not always true. We will discuss in more detail when you might want to separate your federal returns.
Head Of Household
This status is for single filers with a dependent or parent for whom they pay more than half their expenses. Typically, this filing status allows you to claim a higher standard deduction and pay lower taxes than most single filers.
Qualifying Widow(er)
If your spouse is deceased and you remain unmarried for at least two years, you can file using the qualifying widow(er) status. This allows a single filer to take advantage of the married filing jointly tax rates and deductions on his or her Federal tax return.
KEY TAKEAWAYS
- Five different filing statuses are available from the IRS, but it can be challenging to know which status to choose.
- Married couples typically file taxes as Married filing jointly since it usually provides the lowest tax liability, however, in a few situations it may make sense to filing as Married filing separate.
- If you suspect your spouse may be committing tax fraud or evading taxes, filing separately might be a good idea.
Advantages Of Married Filing Separately
Many people wonder when married couples should file taxes separately. What are the benefits of married filing separately?
- This status allows you to file a separate return from your spouse if you are legally separated.
You may be in a situation where you do not wish to file a joint return with your spouse and share your financial information with them. Filing separate returns can help you avoid this situation, as you do not need to share anything on your return with your spouse.
- If you suspect your spouse may be committing tax fraud or evading taxes, then filing separately might be a good idea. Filing jointly can put you on the hook for tax liabilities that your spouse might owe.
You might wonder, “Do I need to file taxes alone?” If you are married and filing separate returns, you can potentially avoid any trouble your spouse might get into. This is one of the most significant benefits of the married filing separately status.
- Finally, filing separately can offer significant financial advantages for couples with disparate incomes or deductions. If one spouse makes substantially more money than the other, then it might make sense to file separate returns.
In addition, if one spouse could take advantage of many itemized deductions, it might make sense to file separate returns.
One thing to note is that filing separately does not affect how long you need to keep your tax returns. You should always follow the IRS rules for keeping your records regardless of your filing status.
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Drawbacks Of Married Filing Separately
When a couple files separate returns, they miss out on many essential tax breaks and deductions that joint filers receive. You will also have to report your spouse’s information, including their Social Security number and adjusted gross income (AGI), on your return.
- If your spouse uses itemized deductions, you will have a standard deduction of zero.
While it might seem like it makes sense to file separate returns because your separate incomes would place you both into lower tax brackets, the tax benefits of a joint return almost always outweigh those of individual returns.
- While it might seem like you would be in a lower tax bracket by filing separate returns, the standard deduction is quite low.
The standard deduction for joint filers is double that of single filers. In addition, if you file separately, you cannot deduct student loan interest payments; you must use smaller IRA contributions, and you can only receive a smaller capital loss deduction.
You should also remember that the rules for reporting separate incomes can be complicated if you live in a community property state. You should always consult a tax professional in that case.
TIP
Married filing separate usually benefits couple with no children and vastly disparate income levels.
How To Choose The Proper Filing Status For Your Tax Return
Obviously, choosing a filing status is an easy decision in some cases.
- Single Filing: If you are unmarried and do not provide care or living expenses for anyone else, you will use the single filing status.
- Head of Household: You should use the head of household status if you are unmarried and provide care or living expenses for a legal dependent or parent.
- Qualifying Widow: Similarly, if you are a qualifying widow or widower, you should select that status.
- Married Filing Jointly: Choosing between filing separately vs jointly can sometimes be challenging if you are married. In most tax situations, you will be better off selecting the married filing jointly status.
- Married Filing Separate: One situation in which you might need to file separately is if you have no children, one spouse has substantially higher taxable income, and the spouse with the lower income has large itemized deductions, like medical expenses for the year.
It might make sense to file separately, even if you file jointly every other year. As mentioned, you can choose a different status in different years, so consult your tax professional to determine if filing separately makes sense.
The Bottom Line
The IRS offers five different filing status options, and choosing between them can sometimes be challenging.
If you are married, you can file jointly or separately. Filing jointly almost always provides a more considerable tax benefit, although a few specific circumstances might make you consider filing separately.
Since joint filers get access to more tax credits and deductions, make sure that you know exactly what the effects of filing separately would mean for you.
The only couples who usually benefit from filing separately are those with no children and vastly disparate income levels.
Remember that you still must include your spouse’s information on your return, and filing separately can help protect you from trouble if you suspect your spouse might be hiding income or breaking other tax rules.
Frequently Asked Questions
Generally, married couples should only file separately in a few limited situations. When one spouse has much lower income but high itemized deductions, filing separately usually makes the most sense.
By filing jointly, the couple’s gross income might be too high to claim those deductions. However, by filing separately, one spouse may be able to take advantage of those deductions. This often occurs when one spouse has high medical expenses for the year.
So, is it better to file jointly or separately? Do you get a tax penalty for filing separately?
Technically, no, you are not penalized for filing separately. However, in practice, you are punished in a way.
You are not allowed to take advantage of many tax credits available to those filers who choose to file jointly. In addition, the deductions that you see from IRA contributions and other things are lower than those that joint filers can receive.
So, while you technically receive no penalty for filing separately, you do receive a penalty in a way because you do not receive the same level of tax credits.
So, what’s the difference between married filing jointly and separately?
Married jointly means the spouses combine incomes and deductions onto a single tax return.
Those filing separately will report their income and deductions on separate returns. However, even when you file separately, you must still report your spouse’s information on your return.
When you file separately, you lose many deductions and credits that those who file joint returns will receive.
There are many benefits to filing jointly. In general, you are eligible for a higher standard deduction and can take advantage of multiple tax credits.
Couples with children often receive even more deductions and tax advantages by filing a joint return.
Regardless of your filing status, the due date for your return will remain the same. Even if you have a deferred tax liability, your taxes will be due on the same date whether you file jointly or separately.
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