Choosing the right tax filing status that best suits you and your needs can be an important factor that may even save you some serious cash.
Married Filing Separate Tax Filing Status
Filing jointly will generally add up to a bigger refund or a lower tax bill. Most married couples choose to file a joint return.
In some situation it might be more of an advantage to file separately.
You must file separate returns if you and your spouse do not agree to file a joint return, unless you are considered unmarried by the IRS and you can qualify for the Head of Household filing status.
When you file tax returns as Married Filing Separately, you and your spouse each prepare your own tax return and report your own individual income, deductions, credits, and exemptions individually. Each spouse is responsible for their own individual tax liability. In turn, each spouse is not liable or responsible for any tax, penalties, or interest charges that result from the other spouse's tax return.
How to file as Married Filing Separately?
Form 1040 or 1040A can be used for Married Filing Separately. You are required to enter your spouse's full name and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) in the spaces provided on the form.
Married Filing Separately filing status cannot be used on a Form 1040EZ.
Why Should I File As Married Filing Separately?
There are a several reasons or advantages for you and your spouse to file separate tax returns. Some of these reasons include:
- In some cases by filing separate you may get a bigger refund (or owe less tax). However, this is generally not the case since joint tax filing usually holds more tax advantages.
- By filing a separate tax return you are only responsible for your own taxes, and not those of your spouse. This allows you to keep your own tax liability separate from your spouse's tax liability.
- If you suspect that your spouse may cheat on your tax return, or may be evading taxes, you can keep yourself safe from the IRS by filing a separate tax return from your spouse.
- When you file a separate tax return, you are not liable for your spouse's liabilities including fines, penalties, interest, and back taxes.
- If your spouse owes back taxes, student loan payments, or child support, all of these may be taken from your tax refund by the IRS if you file a joint return. In this case to protect your own refund, you should file a separate tax return.
- Filing separately can
often benefit those who have a lot of itemized deductions and
are subject to the
Adjusted Gross Income (AGI) "floor".
- Medical expenses: You can only deduct medical expenses that are over 7.5% of your adjusted gross income, so you can deduct more if you do not combine your AGI with that of your spouse.
- Investment expenses and unreimbursed employee business expenses: Like medical, you can only deduct the expenses that exceed 2% of your AGI).
Limitations that apply to Married Filing Separately:
- If either spouse itemizes deductions, then both will have to itemize. You can NOT split one with standard deduction and one itemizing.
- If you choose to claim the standard deduction, your standard deduction amount will be half what it would be if filing a joint return.
- Your tax rate will generally be higher than when filing a joint return.
- Your Alternative Minimum Tax exemption is half of that on a joint return.
- Generally, you cannot claim a Credit for Child and Dependent Care Expenses, and excluding income under an employer's dependent care assistance program is limited to half that when filing jointly. (If spouses are legally separated or living apart, then your allowed to file separately and claim the credit.)
- When filing separate you cannot claim the Earned Income Credit.
- Generally in most cases, you cannot claim the Adoption Tax Credit, and you cannot exclude employer-provided adoption benefits from your income.
- By filing separate you are not allowed to claim any education tax credits, the American Opportunity Credit, or the Lifetime Learning Credit.
- You are not allowed to take the student tax deduction for student loan interest.
- You can't exclude U.S. savings bond interest income from education expenses.
- You cannot claim the Elderly or Disabled Credit if you and your spouse lived together at any time during the year.
- Spouses that lived together any time during the year must include with your taxable income a larger amount (up to 85%) of any Social Security benefits or equivalent railroad retirement benefits received.
- The Child Tax Credit is limited to half the amount allowed on a joint return.
- The Saver's Credit is limited to half the amount allowed on a joint return.
- The capital loss deduction limit is half the amount allowed on a joint return.
- If you and your spouse lived together any time during the year, and either was covered by an employer-sponsored retirement plan, you may not be able to deduct some or all of your contributions to a traditional IRA if your income is over a certain threshold. This amount is lower than that for a joint return.
- If you and your spouse lived together at any time during the year, you cannot deduct losses from passive rental real estate activity. If you did not live together, you can claim a limited amount with this tax deduction.
- If your spouse had any gross income or was claimed as a dependent you cannot claim a tax exemption for them on a separate return. Otherwise you may claim an exemption for your spouse.
Weigh out the limitations above since some may not affect you at all. Others may make you reconsider filing separate. Married Filing Separate can be costly for students.
Additional Married Filing Separate Tax Breaks
Separate Filers Get a Break on AGI Limits: If adjusted gross income is lower on a separate return than it would be on a joint return, you may qualify to claim a larger amount on some deductions like medical expenses that are limited by your AGI.
Taxpayers can file Separately even if they reside in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin). However, in addition to reporting separate income and deductions, you must report half your combined community income and deductions on a worksheet.
Legally married same-sex couples now have the same tax rights as opposite-sex couples to file separate or jointly. However, they must have been married legally.
How To Change A Separate Return to a Joint Return
If you and your spouse decide to change you filing status, you can amend your previously-filed separate tax returns to a single married filing jointly tax return for up to 3 years after the original tax deadline (not including extensions).