Which is best? Married Filing Jointly versus Married Filing Separately?
Two of my clients posed this question this tax season, so I thought it might help to share this information with the rest of you! There is definitely more tax benefit to filing jointly than there is filing separately when there comes to taking advantage of certain deductions and tax credits. HOWEVER, every tax situation is unique. Therefore, before filing your tax return, be sure to examine your personal situation and talk to your tax preparer to help determine which presents the best outcome for you and your spouse. Step In 2 My Office and I will run a customized tax scenario to show you where the chips may fall.
If you are married according to Federal law, you have a choice when selecting your filing status. You can either choose Married Filing Jointly (MFJ) or Married Filing Separately (MFS). One common question that often comes up is “Which one is best for me?” As with most tax related questions, the answers starts with “It depends.” First, make sure you are married according to Federal law.
For Federal taxes, you are considered married if on the last day of the year you are married and living together. This includes common law marriages that are recognized in the state where you now live or in the state where the common law marriage began. Even if living apart, on the last day of the year you are considered married if there is no legal decree of divorce or separate maintenance.
While some states have recognized same-sex marriages, partnerships, and/or unions for some time, the IRS only recently started recognizing legal marriages for same-sex partners. The following sections describe some benefits and pitfalls of choosing MFJ vs. MFS. Sometimes the only way to determine the best way is to try both and compare the results.
Married Filing Separately limits deductions and credits .
Married Filing Separately (MFS) taxpayers may not be eligible to claim the following tax benefits:
Since filing a joint return requires the consent of both spouses, it might sometimes make sense to not be included on your spouse’s tax return. Signing a joint tax return makes you both responsible for the accuracy and completeness of the return and obligates you for any current or future tax liability or penalties.
There are specific situations when it can be better to file separately. These include:
Source: Internal Revenue Service
If you are married according to Federal law, you have a choice when selecting your filing status. You can either choose Married Filing Jointly (MFJ) or Married Filing Separately (MFS). One common question that often comes up is “Which one is best for me?” As with most tax related questions, the answers starts with “It depends.” First, make sure you are married according to Federal law.
For Federal taxes, you are considered married if on the last day of the year you are married and living together. This includes common law marriages that are recognized in the state where you now live or in the state where the common law marriage began. Even if living apart, on the last day of the year you are considered married if there is no legal decree of divorce or separate maintenance.
While some states have recognized same-sex marriages, partnerships, and/or unions for some time, the IRS only recently started recognizing legal marriages for same-sex partners. The following sections describe some benefits and pitfalls of choosing MFJ vs. MFS. Sometimes the only way to determine the best way is to try both and compare the results.
Married Filing Separately limits deductions and credits .
Married Filing Separately (MFS) taxpayers may not be eligible to claim the following tax benefits:
- Tuition and fees deduction
- Student loan interest deduction
- Tax-free exclusion of US bond interest
- Tax-free exclusion of Social Security Benefits
- Credit for the Elderly and Disabled
- Child and Dependent Care Credit
- Earned Income Credit
- Education Credits
- Taxpayers have a much lower income phase-out range for IRA deductions.
- Both spouses must claim the standard deduction, or both must itemize their deductions. One spouse cannot claim the standard deduction if the other is itemizing.
- This filing status generally pays the most tax of all the filing statuses.
Since filing a joint return requires the consent of both spouses, it might sometimes make sense to not be included on your spouse’s tax return. Signing a joint tax return makes you both responsible for the accuracy and completeness of the return and obligates you for any current or future tax liability or penalties.
There are specific situations when it can be better to file separately. These include:
- When you need to separate your tax liability from your spouse. If you file separately, you will only be responsible for the accuracy and payment of taxes for your own return.
- In certain situations when there is a large disparity between incomes of the spouses. This may result in a combined lower tax situation, but usually only in separate (non-community) property states.
Source: Internal Revenue Service