Married people are paired with their partners for better or for worse, but should they unite for tax return filing, too? The IRS lets married people pick between two filing status options—married filing jointly and married filing separately. Which status a couple selects affects their tax returns in numerous ways.
Bottom Line Personal asked tax expert Abby Eisenkraft, EA, what married taxpayers need to know.
| Married Filing Jointly | Married Filing Separately | |
| What It Means | Couple combines incomes and other tax matters onto a single return | Each spouse reports his/her own income on his/her own return |
| Advantages | Lower tax bill | Protection from spouse’s tax liens, audit risk and other financial issues |
| Protection during dvorce | ||
| Each spouse may be eligible for tax breaks | ||
| Disadvantages | Spouses are responsible for each other’s debts and liabilities | Higher tax bill |
| Lost tax breaks, including Child and Dependent Care Credit, Adoption Credit, Earned Income Tax Credit (EITC), Lifetime Learning Credit and American Opportunity Credit | ||
| No IRA or Roth contributions for nonworking spouse | ||
| Both spouses must either itemize or take standard deduction—no mix and match | ||
Married Filing Jointly: Benefits and Drawbacks
What it means: Filing jointly means the couple combines their incomes and other tax matters onto a single return. Both spouses typically share equal responsibility for any taxes, interest and penalties owed…and both are equally entitled to any refund. Joint filing is the option selected by more than 90% of married couples, according to recent IRS estimates.
Tax benefits of married filing jointly
The main tax benefits of married filing jointly boil down to dollars and cents—joint filing almost always results in a lower tax bill for married couples than filing separately, says Eisenkraft. Married couples who file jointly are in more forgiving tax brackets, get a doubled standard deduction and have access to certain tax credits not available to people who file separately. Joint filing also can open the door to making a “spousal IRA contribution” for a spouse who lacks earned income.
Disadvantages of married filing jointly
Filing jointly increases the financial bonds between spouses, which could be problematic if one spouse prefers to distance him/herself from the other spouse’s debts, liability risks or less-than-above-board tax filings.
Married Filing Separately: Benefits and Drawbacks
What it means: When couples file separately, …tax breaks ….
Tax benefits of married filing separately
Filing separately can provide a measure of protection for one spouse when the other faces certain financial issues such as tax liens or audit risk. Separate filing makes particular sense for couples who want to keep their finances as detached as possible because they’re headed toward divorce. Dividing spouses’ income between separate returns also increases the odds that one or both spouses could qualify for certain means-tested programs and tax breaks.
Disadvantages of married filing separately
For the vast majority of taxpayers, filing separately results in higher tax bills, says Eisenkraft. Certain tax breaks often become unavailable—tax credits lost when filing separately can include the Child and Dependent Care Credit, Adoption Credit, Earned Income Tax Credit (EITC), Lifetime Learning Credit and American Opportunity Credit. Separate filers can’t make a deductible spousal IRA contribution for a spouse who has no earned income, and they can’t contribute to Roth IRAs unless their income is relatively low. And filing separate returns doesn’t offer as much filing versatility as couples might imagine—according to IRS rules, spouses in a couple that chooses married filing separately must both itemize or both take the standard deduction…they can’t mix-and-match.
When Does Filing Separately Make Sense?
“Filing jointly usually offers better tax outcomes,” says Eisenkraft, “but there are good reasons to file separately.” When should married couples file separately? Six possibilities…
The lower-earning spouse has student loans
“Income Driven Repayment plans” (IDRs) allow some people who have student loans to lower their debt payments to levels deemed affordable for their income. If a married couple files jointly, both partners’ income are factored into this calculation…but if they file separately, only the income of the spouse who has the debt is considered.
One spouse has an existing tax debt
If a married couple files jointly, the IRS or a state tax authority could grab any refund they’re due to pay either spouse’s tax liens or penalties. Filing separately can prevent one spouse’s refund from being put toward the other spouse’s tax debt.
One spouse has big medical bills
“It’s really hard to deduct medical bills,” notes Eisenkraft. Only the portion of a taxpayer’s medical expenses that exceed 7.5% of that taxpayer’s adjusted gross income (AGI) are deductible. When a couple files jointly, those bills must exceed 7.5% of their combined AGI…but if they file separately, the bills only must exceed 7.5% of the AGI of the spouse who has the medical bills.
One spouse engages in aggressive or outright questionable tax tactics
Both spouses share responsibility for the information provided on a joint return, which is a concern when there’s significant audit risk. (“Innocent spouse” provisions offer some protection for spouses unaware of their partners’ dishonest tax reporting, but this protection is imperfect). Spouses who file separately generally are not liable for the information on each other’s returns.
The couple wants to keep their financial lives as separate as possible
Some married people consider their spouses’ business none of their business.
The couple is divorcing
Married couples who will soon no longer be married couples often want to keep their finances as separate as possible.
Special Considerations
Choosing between separate and joint filing status isn’t an until-death-do-us-part decision—changing filing status from separate to joint or vice versa is something couples can do from year to year. In fact, a couple that files separate returns can amend those to a joint return within the following three years if they realize they made the wrong choice. On the other hand, a couple that files a joint return cannot amend that to separate returns after the due date for that return has passed.
Married couples who live in community property states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin—jointly own their marital assets and income. To file separately in these states, a married couple must complete IRS Form 8958, Allocation of Tax Amounts Between Certain Individuals in Community Property States, to determine what to report on each spouses’ return.
