Married….the Pros & Cons of Filing Separately

Being married doesn’t mean you have to file a joint tax return with your spouse.  Choosing to file as “Married Filing Separately” means that you each claim your own income, deductions or exemptions, and credits on your own tax return.

In general, filing a joint return as a married couple yields a larger return, or smaller tax payment. This occurs for several reasons.  Larger standard deductions and credits are available to those filing a joint return.  Couples filing together can claim two exemptions and multiple credits.  Most of these credits are those realized by couples with children, college students, and the elderly.  Examples include:

  • child and dependent care tax credit
  • tax-free exclusion of Social Security benefits
  • credit for the elderly and disabled
  • deduction for college tuition expenses
  • student loan interest deduction
  • The American Opportunity Credit and Lifetime Learning Credit for higher education expenses

So why would a married couple or spouse chose to file separately?  One of the biggest reasons is that you are not responsible for any tax liabilities and penalties that your spouse incurs.  If you have any reason to believe that your spouse will have a large tax bill, filing separately waives your responsibility to this debt.  Along these same lines, some spouses like to keep their finances separate and therefore may chose to file separately to maintain that goal.  

The other major advantage of filing separately will relate to anyone with large deductions or expenses that couldn’t be realized if a joint return is filed.  Medical expenses are a primary example of these large deductions along with unreimbursed business expenses or large charitable contributions.

The decision to file a joint return or separate returns will be unique to each couple.  If you are looking for the largest possible return and hoping to receive several credits, then a joint return will tend to be your best option.  If you have large expenses to deduct or are nervous about your spouses’ tax bill, then it might be better to file separately.  The best person to help you navigate this choice is a tax preparer who can compare your options and help you make an informed decision.