Can I File Married Separately & Deduct the Mortgage While My Spouse Claims the Standard Deduction?

Once you get married, you might notice that itemizing your deductions for such things as mortgage interest doesn't provide the same proportional savings impact as it did when you were single. You might be better off taking the higher standard deduction for married couples on a joint tax return. If you try to keep your itemized deductions by filing separately, you both must itemize. However, there may be instances where itemizing separately helps reduce your overall taxes.

When Separate is Better

There are certain cases where filing separate tax returns with itemized deductions makes sense. This mainly happens when you or your spouse have a lot of deductions that are based on adjusted gross income. This includes medical expenses, casualty and theft losses, and unreimbursed employee business expenses.

Example

If you had a large amount of out-of-pocket medical expenses, you can deduct only the amount that exceeds 7.5 percent of your adjusted gross income (rising to 10 percent for the 2013 tax year). If you and your spouse together had an AGI of $100,000, you could deduct only the amount of medical expenses that exceeded $7,500. However, if your AGI was $40,000 and you filed separately, you could deduct any medical expenses over $3,000. That extra $4,500 in deductions could make filing separately the best way to go, especially if you have other large deductions such as mortgage interest.

Splitting Deductions

In you and your spouse itemize separately, you will have to split the deductions according to who paid them. For example if you pay the mortgage from your own checking account, you can take the entire mortgage interest deduction. If you pay from a joint checking account, you will have to split the deduction with your spouse based on your individual contributions to the account. However, in community property states you may have to divide all your income and deductions evenly in half unless you can show that you made the payments from non-community funds, which are typically funds from before you were married or that you received separately as a gift. The specifics vary by state.

Considered Unmarried

In certain instances you or your spouse may be "considered unmarried" for tax purposes, and one of you can file as head of household. This generally occurs when you and your spouse are estranged and live apart. In this situation it's OK for one spouse to itemize while the other takes the standard deduction. To be considered unmarried for head of household purposes, you have to live apart for the last six months of the year on a permanent basis, and you have to pay most of the costs of keeping up a home for a dependent child or other qualifying relative.