The Married Filing Separately Filing Status
Considerations for Married Taxpayers Who File Separate Tax Returns
Married taxpayers have the option of filing joint tax returns or separate returns, but the "married filing separately" status provides fewer tax benefits. Why do it then? It depends on your personal considerations and concerns.
Separation of Tax Liabilities
The clearest benefit in filing separately is that each spouse is only responsible for the accuracy of his or her return and payment of any taxes that are due on his or her own income.
By contrast, both spouses are what the IRS calls "jointly and severally liable" for the accuracy of a jointly filed return as well as the resulting taxes.
This means that you're responsible only for the accuracy of your own tax return if you're audited and you've filed separately, and you're only responsible paying the taxes due on that return on income you personally earned.
You might prefer this arrangement if your income is $20,000 while your spouse earns six figures. Filing jointly would put you on the hook for paying taxes resulting from his far superior income. And, of course, if you know or suspect that your spouse is omitting income or overstating deductions, you might not want to be involved.
If the combined taxes due resulting from two separate tax returns is the same as or very close to the tax due that would result from a joint return, filing separately doesn't present any real drawback and it offers protection against liability even if you don't have any particular reason to worry about that concern.
Some spouses just prefer to keep their finances as separate as possible. And, of course, you must file a separate return if your spouse is unwilling or unable to consent to filing a joint return with you because both of you must sign the return when you file together.
How Married Filing Separately Impacts Available Tax Breaks
The married filing separately (MFS) filing status is generally perceived as the least beneficial of all the filing statuses because MFS taxpayers are prohibited from claiming several tax breaks:
- Tuition and fees deduction *
- Student loan interest deduction
- Tax-free exclusion of U.S. bond interest
- Tax-free exclusion of Social Security benefits
- Credit for the Elderly and Disabled
- Child and Dependent Care Credit
- Earned Income Credit
- American Opportunity or Lifetime Learning Educational Credits
* As of April 2018, the Tuition and Fees deduction is only available through the 2017 tax year but stay alert because this might change in future years.
MFS taxpayers also have lower income phase-out ranges for the IRA deduction. Additionally, they must both claim the standard deduction when they're filing, or they must both itemize their deductions. One spouse is prohibited from claiming the standard deduction if the other spouse is itemizing.
Married Filing Separately Tax Rates
Filing status also affects which tax rates are used when calculating your federal income tax. The following tax rates are in effect for those who are married but file separate returns in 2018 for income earned in 2017.
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Some Married Persons Might Be Eligible for Head of Household Status
If you and your spouse are living apart or if you're separated but not yet divorced, one of you might qualify for the head of household filing status instead and this can be particularly advantageous.
Married taxpayers might be eligible to file using the head of household filing status rather than separate married returns if their spouses did not live with them during the last six months of the year. Additionally, your home must have been your child's primary residence for more than half the year or the primary residence of another dependent for the entire year. Some family members, such as your parents, don't have to live with you. You must have paid for more than half the cost of maintaining your household.
If you're eligible to file as head of household rather than married filing separately, you can claim the tax deductions and credits that would otherwise be unavailable to you.
Reporting Community Property
Couples who reside in one of the nine community property states must follow special rules for allocating income and deductions when they file separately.
Community property and income is considered to be jointly owned by both spouses. In other words, if your spouse earns $50,000, half of that is attributable to you as your income regardless of whether you actually earned it. Each spouse reports half the total community property income on his or her separate tax return.
Community property deductions are also split in half with each spouse reporting half the deduction on his or her separate return. These rules apply even if just one spouse lives in a community property state, and it can obviously affect how much income you're responsible for reporting on a separate married return.
As of 2018, the community property states are California, Arizona, New Mexico, Texas, Louisiana, Nevada, Idaho, Washington, and Wisconsin.
The Time Frame for Deciding to File Jointly or Separately
Married couples should decide whether to file either jointly or separately when they file an original tax return, but they can change their minds and switch from two separate returns to a single joint return within three years from the due date of the original return not counting any extensions.
They can change their minds and switch from a joint return to two separate returns only by the April 15 tax deadline for the year.
In either case, if you want to change your filing status after filing your tax return, you must submit an amended tax return, Form 1040X.