Tax Time: Should a Married Couple Ever File Separately?

Alden Wicker
Posted

One of the very first things you’ll choose this tax season is your filing status, which determines the deductions and credits you can take.

Generally, there are two common filing statuses: married filing jointly and single. But it’s a third, less common status that we’ll be discussing today: married filing separately.

As with most things tax-related, choosing whether to file jointly or separately as a married couple is a highly individual and complex decision. That’s why we consulted two certified public accountants to find out how common it is for a married couple to file separately, what it means for your taxes and in which situations it may apply.

RELATED: What Is the Alternative Minimum Tax (AMT)?

What Does It Mean to File Separately?

If you were legally married as of December 31, 2013, then you have two choices for your filing status this year: married filing jointly and married filing separately.

Married filing jointly means you file one return as a unit, with your incomes and expenses lumped together for the purpose of calculating and paying taxes.

Married filing separately is not the same as filing as a single person—it means that you’re married, but you each file your own return, so you don’t take legal responsibility for your spouse’s return, and your incomes and expenses are considered separately. The federal government now recognizes same sex marriages, which gives married same-sex couples this same choice between filing statuses.

RELATED: 11 Things You’re Embarrassed to Ask About Taxes

When Should You Consider Filing Separately?

If you and your spouse have a simple financial situation—two straightforward salaries that are about equal, without any large deductions to take—you can be almost positive you should file together. To put it another way, if you don’t plan on itemizing, then don’t worry about it and file jointly.

“About 95% of married people are better off filing jointly,” says Joseph Boyce, a New York–based certified public accountant. “It’s a lower tax rate. Married filing separately is actually the highest tax rate.” In other words, filing separately isn’t for many of us—and filing incorrectly could be expensive.

So how are you supposed to figure out if filing separately is for you? “It’s difficult,” cautions Boyce, who mentions this is a good time to get a professional opinion tailored to your exact situation. “Especially if you have deductions. I would highly recommend not doing it on your own.”

That said, here are seven situations in which you may want to consider filing separately. Note that, as with most things tax-related, they’re just general guidelines, not iron-clad rules. If you think one of the following situations applies to you, you may benefit from going to an accountant or running the numbers with your go-to tax preparation software.

1. You Have Significant Deductions

For many deductions, the amount you can take depends on your adjusted gross income (AGI). If you and your spouse have unequal AGIs and you need to itemize significant deductions, it may make sense to file separately.

One common example is medical deductions, which have to total more than 10% of adjusted gross income in order to qualify. Let’s say that you and your spouse file jointly, and together you have an adjusted gross income of $250,000. In that case, the two of you need to have spent more than $25,000 (10% of your combined income) in medical expenses in 2013 in order to deduct them at all. But, if you make $50,000, your spouse makes $200,000, and you file separately, you only need $5,000 in medical expenses to qualify. If you make less than your spouse, and have more potential deductions, it might make sense to file separately.

Other deductions tied to AGI include miscellaneous itemized deductions like unreimbursed employee expenses, tax preparation fees and gambling losses. But watch out! There are some deductions and credits that you are simply not allowed to take at all if you file separately. (See why you might want to consult a professional?)

RELATED: 10 Tax Filing Mistakes to Avoid

  • B

    You cannot do a Roth conversion if you file married filing separately,”

    Not correct

    • Kitsu

      -WHY- is it not correct? That would have been a better post than just saying ‘Not correct’ and ending it there!

      • B

        Google

        • Kitsu

          Error 404: File Not Found

          You fail at life, good sir. You are a sir, right?

  • disqus_TPG6QDpw6i

    Another reason to file separately: student loans. For instance, income based repayment plans (IBR) will use the married couple’s combined salary for calculating monthly payments if you file jointly, whereas they will calculate the repayment individually if you file separately. I think this is important to note for a lot of us and was surprised to see this missing from the article!

    • Jason Mikhail Poe

      This is a great point! And it is exactly why I am going to be filing separately this year. However, it wasn’t until this year that the IBR plans became so popular. So maybe this article will be updated after trends found for the 2014 tax year.

      • shan

        Well this is not entirely true, if you have student loans based off income you could always send in three pay stubs from the fiscal year. It does not need to be your taxes.

        • IBR help

          Could you elaborate? My wife and I filed jointly this past year and are paying much more than we could be (her loans, and she works for a non-profit and makes significantly less than me). I was under the impression we had to wait until 2015 to do “Married filing separately” before the IBR repayment could be lowered. Is there a way to change the IBR repayment without having to wait until the tax return is finished?

          • Tyler Whitney

            Yes, just call them and tell them you want to recertify now.

        • Tyler Whitney

          Except if you send in pay stubs and you’re married they want to know your spouses income too, regardless of filing status. But if you do the taxes route they only take your income.

      • mh

        I also just discovered that if you do choose to file separately in order to lower your IBR payment you then cannot claim the student loan interest deduction. I’m not sure if there is a “rule of thumb” to see if it is worth it to lose this deduction. It seems you have to go through both (or several) scenarios to work it out. Anyone have any insight into this?

        • Shari

          I am working through this right now. Go to studentloans.gov and find the repayment calculator and see what your IBR payment would be with your combined income versus separate income. In my case it will save me about $320 per month to file separately but I will not receive a refund. Filing jointly our refund will be about $2,000 so if I file separately I end up saving $3840 in 12 months of payment, meaning that filing separately saves me $1840 more than my refund would be if I filed jointly. More importantly, it makes my monthly payment affordable.

    • Jennifer Smith

      absolutely true! and the only reason i am having to file separately. $800/month in student loans vs $1400 if we file jointly!! and i live in WA, a community property state which makes the separate…less separate with income adjusting and averaging.

  • Trace

    Thanks for this article. My husband is a foreigner and has no income in the US, I do multiple part-time and temp jobs but do not make more than 50K a year, what should we do? Thanks

  • Angel

    If one of you makes a lot less- could this filing separately help qualify for subsidies for the affordable healthcare act (for that person)- or even medicaid- or do they still only consider the total of both of your incomes? I am guessing that they will combine them? This is for Ohio by the way (and they have expanded medicaid….)- so just wondering?

  • http://www.getthepeople.com Megan

    What if you and your husband own your own business together? Should you file jointly or individually? Also, how does this effect how you file for your health insurance?

  • Laurel Beth

    How does filing separately affect homeowners?

  • Rick

    Soon to be ex wife wants to file separately due to student loans. Doing so would cause me to owe 4900.00 and she is more than happy to see that. Do I have any right to make her filed married considering 75% of taxes taken out came from my wages?

    • Herc

      You will be filing as married, just as “married filing separately”. And no, you do not have any right to make her file jointly with you. However, you are only paying taxes on your wages, and she will have to pay on hers. She will not be able to claim a refund from any of your wages during the year.

  • antwa

    Wat if my wife filed her taxes separately an ran off with the money

    • Herc

      She cannot “run off with the money” if she files separately. She would only get a refund bases on her income for the year, not yours.

  • Will

    I would love to know the math behind the accountant from New York’s ’95%’ of people are better filing jointly. In Ohio, if your combined income is over $100k, you are most likely better off filing seperately because of Ohio’s progressive income tax. Ohio requires your state filing status to match your federal status.

  • Princess

    I got married last July and my husband and I lives in two separate states. He has a house and he pays all utilities and mortgage. I also has a house that i pay mortgage and utilities on. I have a son from another man and i support my son through college by myself. I was wondering if i can file head of household, since my husband and I don’t live with each other.

  • Bob

    I took out $90,000 out of my inuity fund to pay a debt my wife says we need a legal separation so she is not responsible, she has her own buisness , for 20yrs we filed jointly, can we file married separate for one year and still be married?