Filing separate returns when married is perfectly legal, but it may not always net your highest tax benefit. Each married couple’s situation is different, however, and sometimes financial gain from claiming credits takes second place to personal choices, which can result in a higher tax liability. If both you and your spouse work and make similar incomes, filing separate tax returns may give you a bigger tax benefit. Or you may simply want to be responsible for your own tax bill without being on the hook for your spouse’s liability. Whatever your reason for filing separately when married, you’ll lose some tax credits that are only available for married couples who file jointly.
Couples that choose to file separately when married will lose the ability to file for certain credits, like the Earned Income Credit.
Identify Credits You'll Lose
The married filing separately earned income credit is non-existent. This credit helps lower-income taxpayers by reducing their tax liability. But married taxpayers must file jointly to get this credit. IRS Schedule EIC notes some penalties for taking this credit if you’re ineligible, such as not being allowed to take the credit for up to 10 years and potentially paying penalties.
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Another education credit – the lifetime learning credit – is another off-limits credit for married taxpayers who file separately. You’ll have to file a joint return if married to take advantage of this credit.
If you’re married filing separately, 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. This credit is available to taxpayers who not only care for children but who also care for other dependents. To claim a partial credit, you must be living apart from your spouse or legally separated.
If you filed your tax return married filing separately in a year during which certain qualified adoption expenses were first available to you, you cannot claim the adoption credit. But if you file an amended tax return using Form 1040X, you may be able to change your filing status to qualify if it’s still during the statute of limitations for the 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.
Justify Some Lost Credits
If you're married, the IRS recommends calculating your tax return by using married filing jointly and married filing separately statuses to determine your highest tax benefit. But even if your higher financial benefit is filing jointly, particularly because of the tax credits that are available for that filing status, you may still prefer filing separately, even if you lose some tax credits. By filing separately, you will protect yourself if the IRS audits your spouse by not being held responsible for your spouse's back taxes, fees or penalties. You may also want to protect your tax refund from being taken to satisfy your spouse's back child-support payments, which can happen if you file jointly. And even though joint filers typically owe less taxes or receive bigger refunds, your particular financial situation may be the exception to this rule.
2018 Tax Law
The child tax credit doubled in 2018 to $2,000 for each qualifying child, instead of 2017’s $1,000 credit. This may be a consideration when you compute your tax liability for filing separately or jointly from your spouse.
2017 Tax Law
If you were married in 2017, but you filed a separate return before you realized you could have claimed some tax credits, you can file an amended tax return and change your filing status to married filing jointly. The IRS gives you up to three years after your original return’s due date in April to correct your return. If you requested an extension, the countdown clock still begins with the April due date, not from the date you filed the extension.
- IRS: Publication 17 - Married Filing Separately
- IRS: Schedule EIC
- IRS: Adoption Credit and Adoption Assistance Programs
- eFile.com: The Married Filing Separately Tax Filing Status
- CNBC: 10 Tax Changes You Need to Know for 2018
- IRS: About Form 1040-X, Amended Individual U.S. Tax Return
- IRS: Publication 501 (2018), Dependents, Standard Deduction, and Filing Information