Tax season brings plenty of decisions, and if you’re married, one big question might be: Should we file jointly or separately?
At My Fiscal Office we always start a married couple's tax return as a joint return. We then analyze the numbers to determine the filing status that would produce the lowest tax possible. However, there are times were the lowest tax bill is not the only consideration.
Let’s explore the pros and cons of each option so you and your partner can decide what’s best for your situation.
What Does the IRS Mean by "Married"?
The IRS considers you “married” if any of these apply:
- You’re legally married under state law.
- You’re in a state-recognized common-law marriage.
- You’re separated but don’t have a legal separation agreement or final divorce decree by the end of the tax year.
If you meet these criteria, you can choose between filing jointly or separately.
Why File Separately?
While most couples file jointly, there are some scenarios where filing separately could help you save money or avoid complications.
1. When You Both Have Similar Incomes
When both spouses have comparable earnings, filing jointly might push you into a higher tax bracket. Filing separately could help lower your tax bill, especially if you take advantage of deductions like medical expenses or certain investment-related deductions.
However, there are trade-offs:
The "married filing separately" status reduces deductions for IRA contributions.
You may lose access to some tax credits entirely.
2. To Deduct Unreimbursed Medical or Casualty Expenses
If one spouse has significant out-of-pocket medical expenses or suffered a casualty loss in a federally declared disaster area, filing separately could be advantageous.
Here’s how it works:
Medical expenses can only be deducted if they exceed 7.5% of adjusted gross income (AGI).
Casualty losses must exceed 10% of AGI.
Filing separately allows the spouse with the expenses to calculate these deductions based on their own lower AGI, making it easier to qualify.
3. Protecting Your Refund
If your spouse owes back taxes, child support, or other debts, filing separately ensures the IRS won’t take your refund to cover their obligations.
4. Divorce or Ethical Concerns
Couples going through a divorce often file separately to avoid complications with joint tax liabilities. Similarly, if one spouse has questionable tax practices, the other may prefer filing separately for peace of mind.
A Look at the Numbers
Out of the 150.3 million tax returns filed in 2016, 3.07 million were filed separately. While this isn’t the norm, it’s clear that separate filing has its place in specific situations.
The Changing Rules on Miscellaneous Deductions
Before 2018, filing separately could help spouses claim miscellaneous deductions like:
Union dues
Job-search costs
Tax-preparation fees
Unreimbursed business expenses
However, these deductions were only allowed if they exceeded 2% of AGI. Beginning in 2018, these types of miscellaneous expenses are no longer deductible under federal law.
Community-Property States
If you live in a community-property state, state laws about income and property ownership may influence your decision. Be sure to check how your state treats separately filed tax returns.
Deciding What’s Best for You
There’s no one-size-fits-all answer to whether you should file jointly or separately—it depends on your financial circumstances and personal preferences. Consider factors like income levels, medical expenses, and your long-term financial goals.
When in doubt, compare your potential tax bills under both filing statuses, or consult a tax professional to guide you.
Bottom line:
The choice to file jointly or separately can make a big difference in your tax outcome. Take the time to explore your options, and you just might find a way to save.
