Most married couples file their taxes jointly as a matter of course. But there are some instances when filing separately is actually the better choice for a married couple. Just in time for tax season, here’s what you need to know to determine when filing jointly and separately makes the most sense:
The Perks of Filing Jointly
In general, the IRS would prefer married couples to file jointly. For that reason, joint filers are offered one of the largest standard deductions offered each year. For 2013 taxes, that joint standard deduction is $12,200—twice the amount offered to single filers or married couples filing separately.
In addition, married couples who file separately forfeit a number of tax credits and deductions that they would otherwise enjoy if they filed jointly. That means if you file separately from your sweetie, you can’t take the earned-income credit, claim adoption expenses or child and dependent-care costs, use educational tax credits, or deduct student loan interest. In addition, the amount of capital gains losses you may deduct is double for joint filers compared to separate filers.
Why You Might File Separately
In general, spouses often want to file separately when they are estranged or heading toward divorce. There are a couple of reasons for that: First, filing jointly means that both spouses are jointly responsible for the tax bill and any future issues. If you have any reason to suspect your spouse of committing tax shenanigans, it’s a good idea to file separately in order to distance yourself from the potential fallout.
Second, spouses who are planning to divorce may decide to file separate returns in order to avoid prolonging the tax ties to each other after the marriage has officially dissolved.
However, even if your marriage is as strong as it was the day of your wedding, there still may be some good reasons for filing separately. In particular, if one spouse has a very low income and had significant medical bills in the last year, the couple may find it is less of a tax burden to file separately. That’s because the spouse with high medical bills and a low income is more likely to reach the 10% of adjusted gross income threshold for itemizing medical expenses.
The Costs of Separate Filing
Married couples who file separately will generally find that more of their income is taxed than both single taxpayers and married couples filing jointly. For example, a single taxpayer who earned $80,000 in 2013 would fall into the 25% tax bracket. But a married taxpayer who earned $80,000 in 2013 and who files separately from her spouse would fall into the 28% tax bracket.
For comparison, married couples filing jointly will stay in the 25% tax bracket until their income reaches $146,400, and singles stay in that bracket up to an income of $87,850. Marrieds filing separately have the lowest threshold for going from a 25% to a 28% bracket at $73,200.
The Bottom Line
For the majority of married couples, joint filing is going to be the least expensive way to pay your taxes. But in certain situations, filing separately will be the most prudent course of action for lowering your tax bill or protecting your assets.
Emily Guy Birken
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