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- What Happens If You File Separate Federal Tax Returns When Married?
When you are married, there are some cases when filing a separate tax return makes more financial sense than filing a joint return. When you file jointly, you and your spouse agree to be responsible for the other's tax return. When you file separately, you are responsible only for your own return. In some cases, filing a separate return makes you eligible to claim certain deductions that you might be ineligible for on a joint return.
High Medical Expenses
If you and your spouse itemize deductions, you have the option of deducting the cost of medical care. But your medical expenses must be more than 7.5 percent of your combined income as of 2012 to be deductible. You cannot claim the deduction if you had $8,000 in medical expenses for the year and your and your spouse had a combined income of $200,000, if you file jointly. You can claim those expenses if your income on its own was $100,000, you paid the costs, and you file separately and itemize. If you live in a community property state, you can claim medical expenses for yourself, your children and your spouse, as long as you paid the expenses from an account that is in your name only and not an account held jointly. Some other expenses are limited by your income as well, including miscellaneous deductions, which need to be more than 2 percent of your income, and casualty losses, which need to be more than 10 percent of your income.
One Spouse Owes Money
A spouse might benefit from filing a separate return if the other spouse owes money, either in the form of unpaid child support, back taxes to the IRS or a defaulted student loan. Only federal or state agencies have the right to garnish a tax refund, not private creditors. The spouse who does not owe money can protect herself in one of two ways, either by filing separately or by completing and signing Form 8379, Injured Spouse Allocation.
One Spouse is Self-Employed
While not all self-employed people claim extravagant deductions, some do. If you suspect that your spouse's business deductions are not exactly accurate or above board, you can protect yourself by filing a separate return. When you file separately, you are not legally responsible for the claims made on your partner's return. Filing separately might be an exceptionally good idea if your spouse's deductions have triggered an audit in the past.
A separate return does has more limitations than a joint return. If you itemize on your return, your spouse must itemize on his return. The number of credits and deductions either of you can claim on a separate return is also limited. For example, if you attended school or had a child in college, neither of your can deduct tuition and expenses or claim an education credit. Neither of you can claim a credit for child care costs. Your loss deductions are also limited on a separate return. If you have a loss from a rental property, you are not eligible for the $25,000 special allowance if you lived with your spouse during the year.
- Smart Money: Should Married Taxpayers File Separately?
- IRS: Tax Topic 203 - Refund Offsets
- Turbo Tax: Who Can Garnish an Income Tax Refund?
- Bankrate: Sometimes, It Pays to File Separately
- IRS: Publication 501 Exemptions, Standard Deduction and Filing Information
- IRS: Publication 555 Community Property - Deductions
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