In this article, we will be discussing one of the IRS filing statuses “Married Filing Separately” and better understand its pros and cons. A lot of people ask is it better to be married and file separate tax returns!
“Married Filing Separately” means a married partners file two separate tax returns. This may benefit them if it results in less tax owed than if they file a joint tax return. You can also choose Married Filing Separately If you simply want each partner to be responsible for his/her own tax bill without being on the other partner liability.
If both you and your spouse work and make similar incomes, with no dependents or education expenses, filing separate tax returns may give you a bigger tax benefit. But if you choose to file as “Married Filing Separately”, you will lose the benefits of some tax credits and deductions.
(1) Earned Income Tax Credit (EITC): This credit helps lower-income taxpayers by reducing their tax liability. But married taxpayers must file jointly to get this credit.
(2) The American opportunity credit, lifetime learning credit, student loan interest deduction and tuition and fees deduction: These are credits and deductions that cannot be taken for married filing separately. If you’re married, you’ll have to file jointly with your spouse to take advantage of these education credits and deductions.
(3) Child and dependent tax credit: The child tax credit is not available for the total amount you’d receive if you filed jointly. You can take a reduced credit that’s equal to half that of a joint return. You may be able to receive a partial benefit for the child and dependent care credit If you were living apart from your spouse or legally separated.
(4) Qualified adoption expenses credit: If you filed your tax return married filing separately in a year during which certain qualified adoption expenses were first allowable to you, you cannot claim the adoption credit in the year you file Married filing separately. But, we can always file an amended return to change to a qualifying filing status within the period of limitations.
(5) Elderly or disabled credit: If you are married and lived with your spouse during any part of a tax year, you cannot claim the credit for the elderly or disabled.
Furthermore, when it comes to married filing separately, both spouses must choose the same method of recording deductions, even if one of them would do better making the opposite choice. If one spouse decides to itemize deductions, then the other spouse must do so as well, even if their itemized deductions are less than the standard deductions.
We, at Taxville Financial, take a consultative approach to help our clients make informative decisions. We will help you determine the most beneficial filing status. If we see, upon our initial review, that you may benefit from Married filing separately status, we will (at no cost to you) calculate your taxes both ways and choose the status that saves you more in tax liability or increase your tax refund.
Michael Zachary, EA, CPHRC