If you're married and filing taxes in the United States, you generally must file as married filing jointly or married filing separate. Most married couples file jointly, which often saves money as well as paperwork. In some cases, though, such as if one spouse has a large potential deduction, you may save by filing separately, and there may also be other legal reasons that make filing separately more favorable than jointly. There's no hard and fast rule about which way to file based on your income alone.
You're usually better off filing jointly than separately if you're married, but exceptions might apply if you're concerned about liability for your spouse's taxes or if one spouse has a large deduction of certain types. Remember that in some limited situations you may also be able to file as head of household while legally married.
Understanding Married Filing Separately Rules
Generally if you are legally married, including being in a common law marriage in a state that recognizes it, you can either file as married filing jointly or married filing separately. You can't file as single if you're married.
When you're married and filing jointly, you and your spouse sign (or electronically sign) and submit a single tax return. You both are attesting that the return is correct and agreeing to be liable for whatever tax you collectively owe. If your spouse is away from home or you simply don't live together, you still must sign the return and submit it. You can sign a joint return for your spouse under special circumstances that include the following:
- Your spouse is serving in the military in a combat zone.
- Your spouse is legally declared incompetent, and you are his or her guardian.
- You have a legal power of attorney, and your spouse can't sign for some other reason.
- Your spouse is injured or ill and simply physically can't sign a document.
Check Both Statuses Before Filing
If your spouse declines to sign a joint return for whatever reason, you generally must file as married filing separately. If both spouses are on good terms and able to file together, you're not obligated to file jointly. Typically, you'll save money by doing so, but if you're not sure whether that's true in your case and you have the time, you may want to prepare returns separately and jointly and see which filing status will mean lower taxes. Your Internal Revenue Service filing status will likely apply to your state and local taxes as well, so make sure to take those into account when deciding how to file.
If you're working with a tax preparer or using tax prep software, your tax expert or software may do some of that work for you. You can find some "married filing jointly vs. separately calculator" tools online as well that can help you at least estimate which filing status is best for you and your spouse.
The Marriage Penalty
People often speak of a marriage penalty that can apply to high-earning married couples. This refers to situations where couples pay more as a married couple than the total of what they would pay individually if they were single. In some cases, couples may also see a marriage bonus, meaning they'll save money in total taxes by virtue of being married.
That's because the rate at which you pay federal income tax depends on where your income falls into particular brackets published by the IRS, and the bracket cutoffs for married couples aren't as simple as being twice those for single people. Generally speaking, if you're thinking in terms of tax implications for working spouses, couples with disparate incomes save by being married, and those with similar incomes face a marriage penalty. The penalties and bonuses are sometimes small.
Tax Law Impacts the Penalty
Many couples will face a penalty at some points in their marriages and a bonus at others as their relative incomes change, as the deductions and credits available to them shift and, of course, as Congress tweaks tax laws over time. The Tax Cuts and Jobs Act passed in 2017 removed some of the sting of the marriage penalty and benefits of the bonus by making the married brackets line up more closely with the single brackets.
Some couples receiving the Earned Income Tax Credit, generally available to working people with lower incomes, can also face a tax penalty by virtue of being married. Other government benefits can also be impacted for the better or worse by being married, and state taxes can have their own rules. Of course, couples don't usually decide whether to marry, stay single or divorce solely based on such questions.
Avoid Penalty by Filing Separately
Since the single tax bracket cutoffs are the same as the brackets for married people filing separately, it might seem that you could logically avoid the marriage penalty by filing separately. For some couples, that is indeed the case. But for many couples, rules around various deductions and other special cases mean something of a penalty will still be in place.
For example, starting in the 2018 tax year, married couples filing jointly and single filers can each deduct up to $10,000 in state and local taxes from their federal taxable income. Married people filing jointly can each deduct up to $5,000. That means that a married couple can deduct up to $10,000 in total whether they file jointly or separately, but if they were single, they could deduct up to $20,000 in total.
Filing jointly will also let the couple claim more deductions in certain circumstances. Consider a couple where one spouse owes $7,000 in state and local taxes and the other spouse owes $2,000. Filing jointly, they can claim $9,000, since that's under the $10,000 limit. Filing separately, one spouse will claim $2,000 and the other will claim the max of $5,000, meaning a total deduction of $7,000. All else being equal, that will mean a total higher tax bill.
Medical Expenses and Filing Status
You are generally able to deduct medical expenses from your taxes that exceed 7.5 percent of your adjusted gross income as defined by the IRS. That rule applies to all tax returns, so married couples filing jointly can claim collective expenses above 7.5 percent of their total income, and those filing separately can each claim expenses above 7.5 percent of their individual incomes.
In some situations, that means a higher deduction for a spouse with high medical costs that files separately compared to a spouse that files jointly. Whether or not that translates to a total lower tax bill for the couple depends on their entire tax situation.
Head of Household Filing Status
Head of household is another type of filing status. It's generally available to unmarried people who are caring for relatives, such as single parents and single people caring for elderly parents. It provides more favorable tax brackets and standard deductions than filing singly.
In some cases, you can claim head of household status if you're legally married. Your spouse must not have lived in your home for the past six months of the year, and you must have paid the bulk of the expenses of the household. You also must file separate returns. This can provide more tax savings than a married filing separately return.
The rules for when you can claim head of household status are complex, so make sure you understand them before claiming this status on your taxes.
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