Your federal income tax filing status affects your deductions, tax credits and tax rate. Married couples generally file jointly, but married persons with dependents may also qualify for married filing separately or as a head of household. If you qualify for more than one filing status, Internal Revenue Service rules allow you to choose the status that results in the lowest tax.
Most married people with dependents file a joint tax return. With a joint return, you and your spouse combine your incomes, exemptions and deductible expenses. You can file jointly even if one spouse had no income or if you and your spouse live apart but are not legally separated. Joint filers generally pay the lowest tax rate and get the highest standard deduction. They may qualify for tax breaks not available to other filing statuses. Both spouses are jointly responsible for the taxes due. If one spouse was a nonresident alien during the tax year, the couple can’t file jointly.
Married couples can choose to be married filing separately. That means that each spouse files a tax return based only on individual income, deductions and credits. If spouses can’t agree on who gets to claim dependents, they must follow IRS tiebreaker rules. Married persons filing separately generally pay a higher tax rate than joint filers and lose certain credits and deductions. Separate filers lose certain tax credits, such as for earned income, child care and college education. The child tax credit and retirement savings contribution credit get cut in half. Separate filers lose the student loan interest and college tuition deductions. Their standard deduction and investment loss deductions are cut in half. If one spouse itemizes, both must itemize. Separate filers can’t deduct IRA contributions if income exceeds $10,000.
Why File Separately?
Despite the drawbacks, there are circumstances where it may pay to file separately. If one spouse had very large deductible expenses that are subject to income exclusions, such as medical expenses or miscellaneous deductions, filing separately may reduce the income exclusion threshold and produce a larger deduction. Couples may choose to file separately if one spouse has potential tax liabilities because of underpayments, or has potential problems with reported income or deductions. Separate filing absolves a spouse of any responsibility for the other spouse’s tax troubles. If there is a great disparity between the spouses’ respective income and deductions, separate filing could produce a lower total tax bill than filing jointly.
Head of Household
Married persons who live apart from their spouse may choose to file as a head of household. By filing as a head of household, you will pay a lower tax rate and get a larger standard deduction than people who are married filing separately. You also can handle deductions as you see fit, regardless of what your spouse does. To qualify for this status, you and your spouse must have lived apart for the last six months of the tax year, or your spouse must be a nonresident alien. You must have paid more than half the cost of maintaining your household, and you must have a dependent child or other dependent relative who lived with you more than half the year and for whom you can claim an exemption.
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