Virtually all married couples file their taxes jointly, and who can blame them? It’s usually easier to prepare one tax return than two, and it almost always results in a lower tax bill than filing separately. But sometimes, using the married filing separately tax status to split up those returns might make sense financially. Here's how it works and when it could benefit you. Show
What is married filing separately?Married filing separately is one of five tax-filing statuses available to taxpayers. Under the married filing separately status, each spouse files their own tax return instead of one return jointly. Instead of combining income, each person separately reports income and deductions. How married filing separately worksAlthough most married couples file jointly, they can choose the married filing separately status if they want. There are rules to follow for filing separately, though.
Nonetheless, in the right circumstances, being married and filing separately could save you money. Here are a few things to think about if you’re considering whether it’s right for you. Student loans
Medical expenses
Complicated spouses
What’s yours is mineIf you’re thinking seriously about filing separately, there’s one more thing to understand: Even if you do the math and determine you’ll pay less by filing separately, state law might throw a wrench in your plans. That’s because if you live in a community property state — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin — anything couples earn generally belongs to both spouses equally. Couples filing separately there each have to report half of the income both spouses earned, which could nullify most of the advantages of filing separately. Take charge of your financial life right now
When should married couples file separately?Usually, it makes sense financially for married couples to file jointly. However, when one spouse has significant medical expenses or miscellaneous itemized deductions, or when both spouses have about the same amount of income, it might be wiser to file separately.
Does married filing separately affect taxes?And while there's no penalty for the married filing separately tax status, filing separately usually results in even higher taxes than filing jointly. For example, one of the big disadvantages of married filing separately is that there are many credits that neither spouse can claim when filing separately.
What are IRS rules for married filing separately?If you and your spouse file separate returns, you should each report only your own income, deductions, and credits on your individual return. You can file a separate return even if only one of you had income. Community or separate income.
Why would someone file taxes married filing separately?If you're part of an income-based student loan repayment plan, it may make sense to file taxes separately since earnings typically determine what's due every month. Filing jointly may trigger higher payments, Loyd said, but you need to weigh the other trade-offs before filing apart to lower your bills.
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