You and your spouse might decide to file your federal income tax returns as married filing separately for a number of reasons. You might be separated but are still legally married, for example. Choosing to file separately even if you are happily married lets you claim some deductions that are otherwise off-limits. Making the choice to file separately also closes a number of tax write-off doors, such as the ability to claim certain credits.
When you have children together and file separate returns, only one of you can claim the children as exemptions on your tax return. Usually, the parent who lives with the child for more than half of the year claims the child as a dependent on her return. But, if you both live together, you need to decide who gets to claim the child. The IRS has tiebreaker rules that decide who can claim the dependent. Typically, if you live together and file separately, the person with the higher adjusted gross income claims the dependents.
Child Tax Credit
The person who claims a child as a dependent on his tax return also gets to claim the child tax credit of up to $1,000 for each child under the age of 17. The child tax credit does have income limits. If you file separate returns, you cannot claim the full credit if your AGI is more than $55,000. The limit for couples filing jointly is $110,000 for the 2012 tax season. If one spouse earns less than $55,000, it might be worth it to have that spouse claim the child as a dependent, so that she can also claim the credit.
Filing a separate return might mean that you are able to deduct the cost of your children's medical expenses, provided those expenses are more than 7.5 percent of your AGI. You can deduct medical expenses you paid for your child whether you claim him as a dependent or not, as long as the child lived with you and you provided more than half of his support. To claim the full amount, you need to prove that you paid the entire cost of the expenses. If you live in one of the community property states, split the amount of the expenses in half if you paid from a joint account.
One drawback of filing a joint return as a parent is that you cannot claim any education credits, such as the Lifetime Learning Credit or the American Opportunity Credit, for tuition you paid for your college student child. You also don't get to deduct the cost of tuition from your return if you file separately, nor can you deduct student loan interest you paid.
Choosing Head of Household
Depending on your circumstances, it might make more sense to choose head of household instead of married filing separately. Even if you are still legally married, you can choose to file as head of household if your spouse didn't live in your house for the last six months of the year. Your child needs to live with you for at least half of the year and you need to pay more than half of the cost to maintain the house. The standard deduction for head of household status is higher than the deduction for married filing separately.
- Internal Revenue Service: Publication 501, Exemptions, Standard Deduction, and Filing Information
- Internal Revenue Service: 10 Facts About the Child Tax Credit
- Internal Revenue Service: Publication 502, Medical and Dental Expenses
- Turbo Tax: Tax Exemptions and Deductions for Families
- Internal Revenue Service: Publication 504, Divorced and Separated Individuals