Deciding the filing status you and your estranged wife should choose at tax time can be challenging. The Internal Revenue Service provides only two filing status choices for married couples — joint or separate. Your estranged wife can file separately, but depending on your situation you might qualify to select an unmarried filing status that yields better tax results and does not attach your wife to your return affairs.
You’re considered married for the entire tax year if you aren’t legally divorced or separated on or before Dec. 31. The IRS requires that married individuals file either a joint or separate return. If you file jointly, both you and your estranged wife must agree to do so. If you don't agree, you must file a separate return. However, if certain conditions are met, the IRS may consider you and your estranged wife unmarried.
If you and your wife live apart for the last six months of the year, the IRS considers you unmarried even if you haven’t filed for legal separation. You and your wife can still choose to file a joint or separate return, but in some cases you might need to file as if you’re unmarried. It may be difficult to file a joint return if your estranged wife is not in communication with you. Filing a separate return is still an option, but there might be disadvantages in doing so, especially if you have dependent children or claim certain tax benefits. If you consider yourself unmarried under IRS rules, two options are a single filing status or head of household if you have a qualifying dependent.
Higher Tax Rates
If you choose a married filing separate status, both you and your estranged wife will have higher tax rates. This status has tax rates similar to those for single filers. If you have high income and claimed "married" on the W-4 withholding allowance certificate you gave to your employer, you may have insufficient withholding to cover your tax bill.
Loss of Tax Benefits
The IRS disallows or reduces many tax benefits to married taxpayers who file separate returns. For example, if you have capital losses or rental real estate losses, your deduction is reduced to half the regular rate. As of June 2012, if you file a separate return, you can deduct only up to $1,500 in capital losses and up to $12,500 in rental real estate losses. If you have dependent children and file separately, you can’t claim the child care credit, education benefits or the earned income credit. Filing as a single or head of household taxpayer in this case restores your ability to claim credits and deductions you’re eligible to take.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.