What Is Married Filing Separately?
Married filing separately refers to a tax status used by married couples who choose to record their respective incomes, exemptions, and deductions on separate tax returns. There is a potential tax advantage to filing separately when one spouse has significant medical expenses or miscellaneous itemized deductions or when both spouses have about the same amount of income.
Married filing separately can be contrasted with married filing jointly.
- Married filing separately is a tax status used by married couples who choose to record their incomes, exemptions, and deductions on separate tax returns.
- Filing separately may keep a couple in a lower tax bracket and, therefore, keep each individual’s tax liability at bay.
- If one spouse itemizes deductions, the other must, as well.
- Although couples may benefit from filing separately, they may not be able to take advantage of certain tax benefits.
Understanding Married Filing Separately
The Internal Revenue Service (IRS) gives taxpayers five different tax filing status options when they submit their annual tax returns: single, married filing jointly, married filing separately, head of household, or qualifying widow(er). Anyone who files as married in either category—filing separately or filing jointly—must be married as of the end of the tax year. So someone who files as married on April 15, 2020, should have been married no later than Dec. 31, 2019. Even though the couple files separately, the IRS requires taxpayers to include their spouse’s information on their returns.
Using the married filing separately status may be appealing and have financial advantages to certain couples. Combining their incomes and filing jointly may push them into a higher tax bracket and, therefore, increase their tax bill. Filing separately may keep a couple’s tax liability at bay.
Although there are financial advantages to filing separately, couples miss out on tax credits meant for couples who file jointly.
According to the IRS, if you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. Therefore, the other spouse should also itemize deductions. Note that thanks to the Tax Cuts and Jobs Act of 2017, the standard deduction rose substantially in tax year 2018. For 2019 taxes it has risen even further, to $12,200 for individuals and $24,400 for married filing jointly (for 2020, those figures will be $12,400 and $24,800). As a result of this change, one spouse must have significant miscellaneous deductions or medical expenses in order for the couple to gain any advantage from filing separately.
Married filing jointly offers the most tax savings, especially when spouses have different income levels. This means if you use the married filing separately status, you are unable to take advantage of a number of potentially valuable tax breaks. Some important breaks include:
- Child and Dependent Care Credit. This is a nonrefundable tax credit used by taxpayers to claim unreimbursed childcare expenses. Childcare can include fees paid for babysitters, day care, summer camps—provided they aren’t overnight—and other care providers for children under the age of 13 or for anyone who cares for dependents of any age who have a different ability.
- Hope Credit. This nonrefundable credit is available to parents who file jointly and whose modified adjusted gross income (MAGI) is $160,000 or less. It allows a credit of $2,500 toward tuition of a student who has not yet completed four years of college.
- American Opportunity Tax Credit (AOTC). Introduced in 2009, the AOTC also requires that couples filing jointly have a MAGI of no more than $160,000 for a full credit. Couples who make between $160,000 and $180,000 can apply for a partial ATOC, while those who make more than $180,000 do not qualify. Couples can save as much as $2,500 on qualified educational expenses for students who attend an approved post-secondary institution for the first four years.
- Lifetime Learning Credit. Parents can lower their tax bills by claiming the amount spent on tuition on a dollar-for-dollar basis by as much as $2,000. Qualifying tuition includes undergraduate, graduate, or professional degree courses. For filing 2019 taxes, the income for couples filing jointly must not exceed $134,000 to take advantage of this credit.
As a couple who files joint tax returns, you can also take deductions for your contributions to a traditional individual retirement account (IRA) and for any expenses related to the adoption of a qualifying child.
Benefits of Married Filing Separately
Tax bills aside, there is one scenario in which married filing separately may be especially wise. If you don’t want to be liable for your spouse’s taxes, consider filing separately. For instance, if you suspect that your spouse is hiding income or claiming deductions or credits falsely, it may be wise to file separately.
Signing a joint return means both spouses are responsible for the accuracy of the return and for any tax liabilities or penalties that may apply. By signing your own return and not a joint one, you are only responsible for the accuracy of your own information and for any tax liability and penalties that may ensue.
If you live in community property states, which include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, you may need to see a tax professional, because the rules about separate incomes can be tricky.