Every year, married couples choose whether to file taxes jointly or separately. Although there are many advantages of joint returns, there are some scenarios when filing separately is considered better. In this article, we will discuss the scenarios of when married couples filing taxes separately makes more sense than filing taxes jointly.
Married couples filing taxes separately and jointly: what does it mean?
Married filing jointly involves couples filing a single return, while married filing separately means couples filing their own taxes with individual income, credits and deductions. When couples file taxes jointly, both are responsible for any tax liability or penalties and receive a combined refund.
According to the IRS data, about 3.9 million couples filed separately, while over 54 million couples filed their taxes jointly in 2021.
Who can use Married Filing “Jointly” and “Separately”?
All legally married couples are eligible to file taxes jointly even if one spouse has no taxable income or deductions. More importantly, a taxpayer is eligible to file jointly depending on his or her marital status on the last day of the tax year.
For example, if you married on Dec. 31, 2024, you and your spouse will be eligible to file a joint return for the 2023 tax year. On the other hand, if you legally got divorced on December 31, you won’t be able to file a joint return.
A taxpayer is also eligible to file a joint tax return if the other spouse died during the tax year and he or she haven’t remarried. Also, a couple living apart but not legally separated can file a joint return.
Couples who live together under the common-law marriage are also allowed to file jointly, provided the state recognizes the marriage.
Similarly, the married filing separately option is available to couples who are legally married. This filing status option is not available to unmarried couples. The IRS also considers a taxpayer unmarried if the couple gets separated under a “separate maintenance” decree. In such a case, taxpayers can choose to file either as single or head of household filing status.
Benefits of filing a joint return
Filing jointly is a simpler and quicker way for couples to file taxes. In general, filing separately results in more taxes because couples are unable to claim certain tax breaks that are available only to joint filers, such as education credits, adoption expenses credits and more.
However, when filing separately, if one spouse itemizes deductions, the other spouse is not allowed to claim the standard deduction.
Filing taxes separately, on the other hand, is more complicated as it involves two returns. Moreover, filing taxes separately gets even more complicated in the “community property states” (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin).
Income and deductions in such states are usually split 50-50 between couples unless they have lived apart all year. In such a case, each spouse needs to return their own individual income plus half of all “community” income.
When does married couples filing taxes separately make more sense?
Here are the situations when married couples filing taxes separately makes more sense than filing jointly:
When you have an income-based student loan repayment plan
The monthly payment for an income-based student loan repayment plan depends on the taxpayer’s adjusted gross income (AGI). Usually, the AGI is higher when couples file taxes jointly.
If you want to bring down the monthly payment for such types of student loans, you may consider filing taxes separately. However, before you consider filing separately, it is important that you weigh the other downsides of filing apart.
Keeping finance separate from personal matters
Some couples, even if they are happily married, prefer to keep their finances separate from that of the spouse. In other words, if each spouse wants to keep their tax liability with themselves, they need to file separately.
Also, when couples file jointly, both are responsible for any mistakes or unpaid taxes on a joint return. On the other hand, when filing separately, each spouse is responsible for their own income and tax liability.
So, if you aren’t confident of your spouse filing taxes accurately, filing separately gives you peace of mind from any potential tax evasion or penalties.
In some cases, however, the spouse filing taxes accurately could qualify for innocent spouse relief. This relief saves the innocent spouse from additional taxes, penalties and interest due to the wrong filing of the other spouse. The innocent spouse needs to meet a few requirements to qualify for the innocent spouse relief.
Maximizing itemized deductions
When filing taxes, you either use the standard deduction or itemized deductions, whichever is higher. The standard deduction for married couples filing jointly in 2023 was $27,700, making it harder for couples to claim tax breaks for charitable gifts, medical expenses and other expenses.
On the other hand, the standard deduction limit for separate filers was $13,850, which is easier to exceed. However, when filing jointly, if one spouse itemizes, the other won’t be able to take the standard deduction, which could increase their tax liability.
One spouse owes money to the federal government
If one spouse owes a significant amount of money to the federal government, filing jointly may reduce the total refund.
For instance, if one spouse owes back taxes or child support or has failed to pay federal student loans, the Treasury Offset Program is allowed to use the joint return to cover those debts. Separate filers can avoid being held responsible for the money owed by the other spouse to the federal government.
Which is better?
Though filing jointly is easier to prepare and typically results in a lower overall income tax bill, filing separately can be beneficial in certain scenarios. Thus, it is important that couples carefully weigh the pros and cons of filing jointly and separately, against their own unique financial situation to decide on the best filing option for themselves.
