One of the first questions asked when preparing a tax return is how to file: married filing jointly, or married filing separately? The way the tax code is written, married filing jointly usually results in a lower tax bill than if filed married filing separate. For this reason, the IRS generally advises spouses to file jointly.
While a vast majority of couples file jointly, there may be instances when it makes sense to file separate.
When It May Be Best to File Jointly:
You have children. Certain miscellaneous deductions and credits do not apply to married filing separately taxpayers. Those include the childcare tax credit, adoption credit, earned income credit (EITC), and education credits (student loan interest included). See here for the full list.
One spouse earns a majority of combined income. Married filing jointly has the advantage of double the deductions for certain expenses, most importantly, for contributions to retirement savings accounts. Filing jointly allows a couple to reduce their tax bill and increase their retirement nest egg, a win-win all around.
When It May Be Best to File Separately:
You are going through a divorce or separation. As long as you’re married filing jointly, each spouse is responsible for taxes or penalties owed to the IRS. Meaning, if your estranged spouse agrees to pay the tax, and they don’t, the IRS can come after you to collect the bill.
Your spouse has prior or ongoing tax issues. As mentioned above, each spouse is legally and financially responsible for tax due to the IRS if filing married jointly. Filing separately means you’re not on the hook for your spouse’s tax issues, and if any future issues arise, you may qualify for Innocent Spouse Relief to shield you from any of their transgressions.
Your income is about equal. In some cases, filing jointly may end up pushing you and your spouse into a higher tax bracket and thus owe more tax than if you filed separately. It may be worth taking a look at the tax brackets to see if this may be the case, and speak with your Dallas CPA to find out if married filing separately would be more beneficial.
In the end, many couples do find that filing jointly is the best case scenario. However, if you find yourself in a unique situation where filing separately could be more advantageous, it’s best to consult with your tax preparer to make sure to make the most of the available tax credits and deductions.
