When you get married, you might assume your taxes are now a joint venture. But that does not necessarily have to be the case.
Filing jointly tends to be the more popular option among married couples, both because it’s easier and because it can offer more tax benefits, potentially resulting in a lower tax bill. For some spouses, however, filing separately may be the preferable choice.
What is the difference between married filing separately vs. jointly?
Married couples have two filing status options come tax time: married filing separately and married filing jointly. When couples file jointly, they submit just one tax return that combines “income, deductions and credits with a spouse’s, all on one tax return with the same tax rate,” said Fidelity. Meanwhile, married filing separately means that you each file your own return, keeping your income, deductions and credits, and thus tax liabilities, separate on two different tax returns.
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This choice has consequences beyond whether or not you can work together on your return. It also affects your effective tax rate and your eligibility for tax deductions and credits, which in turn determines how much you pay and get back at tax time.
When can it make sense to file separately?
While married filing jointly will generally result in the lower tax bill, “filing separately might be advantageous in situations where one spouse has significant deductible expenses or concerns about joint liability, as it allows for more individualized tax treatment,” said Chase. More specifically, couples may consider married filing separately in the following situations:
One of you has high medical bills. “If one spouse’s out-of-pocket medical expenses exceed 7.5% of their individual adjusted gross income (AGI), but don’t exceed 7.5% of their joint AGI, they might be able to lower their taxes by filing separately and taking the medical deduction,” said Intuit TurboTax.
Either you or your spouse has student loan debt. “If you’re on a student loan income-driven repayment plan, filing separately could reduce your bill since it would be based on your income alone, instead of your spouse’s income and yours combined,” said Fidelity.
There are tax liabilities or other issues. “If you don’t want to be liable for your spouse’s taxes and suspect that they are hiding income or claiming deductions or credits falsely, then filing separately is probably the best option,” said Investopedia. If you sign a joint return, you are assuming responsibility.
Another factor worth evaluating is your incomes and how combining them (or keeping them separate) influences your total tax bill. For instance, “dual-income households with similarly large paychecks could be pushed into a higher tax bracket than if they filed separately,” said CNBC Select.
When is married filing jointly a better choice?
The reason filing jointly is typically more advantageous is because “joint filers usually have higher income thresholds for certain taxes and deductions,” which “means they can earn a higher income and still qualify for certain tax breaks,” said Intuit TurboTax. They can also “more easily qualify for various tax credits,” including the Earned Income Tax Credit and Child and Dependent Care Credit.
The laws of your state are also worth weighing. If you live in a community property state, where all assets earned during marriage are considered jointly owned, “couples filing separately there each have to report half of the income both spouses earned, which could nullify most of the advantages of filing separately,” said NerdWallet.
