Rules of Married Filing Separately

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When you are married, you have the choice of filing your taxes jointly or separately. What are the benefits? Here we discuss the option of married filing separately on your tax returns.

What Is Married Filing Separately on Taxes?

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Married couples that file their taxes together, also called filing jointly, file with the same return. They take joint responsibility for the information on the return and the amount of taxes that are owed to the government. When you are married and file separately, each person in the couple can have a separate responsibility for the taxes owed. Filing separately while you are married can disqualify you from a large number of tax breaks. However, there are some situations that would warrant married filing separately (MFS) versus married filing jointly (MFJ).

Is There a Need to File Separately if You Are Married?

Here we will discuss situations that could create benefits for a person that is married filing separately.

You Need to Separate Your Tax Liability

There may be a need to separate your tax liability from that of your spouse. If you sign a joint return, both people are responsible for whether the information on the return is correct. If penalties or additional taxes are owed, both people are responsible. If you think your spouse is less than truthful about income or deductions, you may want to separate your tax liability. If you are audited by the Internal Revenue Service when you file separately, you are only responsible for paying what you owe on your earnings. In a situation where your spouse’s income is significantly higher than your own, it may be especially advantageous to submit your tax returns as married filing separately.

One Spouse Has Substantial Itemized Deductions

If both spouses have taxable income and at least one person, usually the spouse with lower income, has substantial itemized deductions that are limited by adjusted gross income, it may be helpful to submit a married filing jointly return. Itemized deductions can be limited by your adjusted gross income. Some of these deductions include:

  • Charitable deductions – deductible up to 20%, 30%, or 50% of adjusted gross income, depending upon type of gift
  • Medical expenses for those under age 65 – deductible if they are greater than 10% of adjusted gross income
  • Medical expenses for those age 65 or older – deductible if they are greater than 7.5% of adjusted gross income
  • Miscellaneous expenses, including tax preparation costs, investment expenses, and unreimbursed business expenses – deductible if they are greater than 2% of adjusted gross income
  • Personal casualty losses – deductible if they are greater than 10% of adjusted gross income

Here’s an example of a situation where one spouse has substantial itemized deductions. A couple has a large quantity of unreimbursed healthcare costs. The spouse with the most medical expenses can calculate the deductibility against his or her lower adjusted gross income. When filing separately, the allowable deductions could be higher than if the couple submitted their return as married filing jointly. Therefore, the couple submitting a married filing separately return could reduce the amount of tax liability.

Other Considerations for Married Filing Separately

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Your state income taxes are another factor to consider if you want to submit tax returns as married filed separately. Calculating federal and state taxes owed may influence your decision to file separately. Here are some other considerations.

Community Property States

In community property states, marital property is owned by spouses equally. Marital property includes earnings, property purchased with earnings, and debts gained during the marriage. For example, if your spouse earned $60,000, half of that would be reported as your income even if you did not work outside the home. In general, assets owned by each individual before the marriage and after the couple physically separates are considered that individual’s property.

Community property states require different rules for distributing income and deductions when filing separately. Community property states include Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin (as of 2018). Even if only one spouse lives in a community property state, community property deductions must be split in half, with each spouse reporting half of the deduction on each return.

Other Reasons for Filing Separately

Some spouses may prefer to keep their finances separate. If the taxes owed when submitting a return as married filing separately are the same or very similar than if you file jointly, you may choose to file separately.

If you or your spouse has income-based student loan payments, you may want to file to keep the payments based on only the student’s income and not the combined income of the couple. If you or your spouse owes unpaid taxes and the Internal Revenue Service may take a refund to offset the balance due, you may want to file separately. If both you and your spouse earn a high income, it may be advantageous to file separately.

There may be non-financial reasons a couple would want to submit a married filing separately return. One member of the couple may not be able to consent to filing a joint return. One member of the couple may be unwilling to consent to filing a joint return. The married couple may be separated, but not yet divorced, and wish to keep their tax returns separate. The couple may live separately and one spouse qualifies as the head of household.

Head of Household Status

A legally married person may be considered unmarried by the IRS. If that is the case, that person may choose to file as head of household rather than married filing separately. Certain criteria must be met to submit returns as a head of household filing status. One of these criteria is that the spouses did not live together for the last six months of the year. Another criterion is that a child or other dependent must have had their primary residence with you for more than half of the year.

As head of household, you must have had to pay for more than half the cost of maintaining the household. If you are eligible to file as a head of household, there are certain tax deductions and credits that are available to you because of your status. However, determining status as head of household can be tricky. Consult your tax professional or the IRS What Is My Filing Status tool for more information.

Tax Rates of Married Filing Separately

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Here are the federal tax rates in 2018 for those who are married filing separately, according to Forbes magazine.

If Taxable Income Is

Then Tax Due Is

$0 – $9,525

10% of taxable income

$9,526 – $38,700

$952.50 + 12% of the amount over $9,525

$38,701 – $82,500

$4,453.50 + 22% of the amount over $38,700

$82,501 – $157,500

$14,089.50 + 24% of the amount over $82,500

$157,501 – $200,00

$32,089.50 + 32% of the amount over $157,500

$200,001 – $300,000

$45,689.50 + 35% of the amount over $200,000

$300,000 and above

$80,689.50 + 37% of the amount over $300,000

Amending Your Return

If you change your mind about whether to submit your tax return as married filing separately or married filing jointly, you can file an amended return. However, some restrictions apply to filing an amendment, also known as a Form 1040X. If a couple files separately, they have 3 years from the due date of the original return (not counting extensions) to switch to a single return. However, if the couple files jointly, they only have until the April 15th deadline of that tax year to change their mind.

Cons of Married Filing Separately

There are negative impacts of the married filing separately status. One is that the two filers must both itemize or both claim the standard deductions. One filer cannot itemize while the other claims the standard deduction if they submit their taxes as married filing separately. In addition, those who submit taxes as married filing separately are unable to claim a number of tax breaks. These include the following:

  • Adoption Tax Credit
  • American Opportunity or Lifetime Learning Educational Credits
  • Child and Dependent Care Expenses
  • Credit for the Elderly and Disabled
  • Earned Income Credit
  • IRA contributions (under certain circumstances)
  • Passive real estate loss (under certain circumstances)
  • Student loan interest deduction
  • Tax-free exclusion of Social Security benefits
  • Tax-free exclusion of U.S. bond interest
  • Tuition and fees deduction (currently available through tax year 2017, but this may change in the future)

Some other tax breaks are significantly reduced. The following will be half of the amount as the deduction on a joint return.

  • Alternative standard deduction
  • Capital loss deduction
  • Child tax credit
  • Standard deduction
  • Saver’s credit

Conclusion

You should always do your research before filing your tax return. Crunch the numbers and see whether submitting your return as married filing separately, married filing jointly, or filing as head of household is the best for you. There are some circumstances where married filing separately, as discussed here, is the best choice. Consult your tax professional for up-to-date advice. You can also consult the IRS website for tools such as the What is My Filing Status interactive tax assistant for more information.