The Married Filing Separately Tax Filing Status
Considerations for Married Taxpayers Who File Separate Tax Returns
Married taxpayers have the option of filing joint tax returns together, or they can file separate returns. The "married filing separately" (MFS) status provides fewer tax benefits, however. You'll be disqualified from claiming several advantageous deductions and credits, and your income phaseout limits for other deductions will be more prohibitive.
So why do it? It depends on your personal circumstances and concerns.
Many professionals advise doing your taxes both ways to figure out which is the most advantageous for your personal situation.
The Benefits of Filing Separately: Division of Tax Liability
Both spouses are "jointly and severally liable" for the accuracy of a jointly filed tax return, and they're also jointly and severally liable for any resulting taxes.
An exception exists if one spouse can prove a case for innocent spouse relief, establishing that he had no knowledge of the other's misstatement of tax information. It would therefore be unfair to hold him liable for any debt or penalties resulting from those misstatements. The spouses cannot have transferred property to each other for any fraudulent reason, not only in an effort to outsmart the IRS, but to get around creditors and other obligations as well.
But you don't have to deal with all this if you file separately. You're automatically responsible only for the accuracy of your own tax return when you file this type of return, and you're only responsible for paying the taxes due 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 some significant taxes resulting from his far superior income. And, of course, you might not want to be involved if you know or suspect that your spouse is omitting income or overstating deductions.
Filing separately doesn't present any real drawback if the combined taxes that are due on two separate tax returns are the same as or very close to the tax that would be due on a joint return. You'll receive protection against liability, even if you don't have any particular reason to worry about that.
And some spouses just prefer to keep their finances as separate as possible. 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. An exception to this rule exists when one spouse dies during the tax year.
How Married Filing Separately Impacts Tax Breaks
The MFS filing status is generally perceived as being the least beneficial of all the filing statuses because separately filing married taxpayers are prohibited from claiming several tax breaks. These include:
- 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
MFS taxpayers also have lower income phase-out ranges for the IRA deduction. 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
Your filing status also affects the tax rates that 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 2019 for tax year 2018.
|Tax Rate||Taxable Income Is||But Not More Than|
|37 percent||$300,001 or more|
These tax rates and brackets are significantly different from what they were in 2017 due to the Tax Cuts and Jobs Act (TCJA) that went into effect in January 2018.
Income perimeters are often tweaked periodically to keep pace with inflation, but the TCJA changed tax rates for all filing statuses as well and this resulted in more substantial changes to income limits.
These brackets are the same as those that apply to single taxpayers...with one major exception. The 35 percent tax bracket covers income up to $500,000 for single taxpayers, but those who are married and file separately hit the highest tax bracket of 37 percent at incomes of just $300,001, a significant $200,000 difference.
Some Married Persons Might Be Eligible for Head of Household Status
You or your spouse—or perhaps even both of you—might qualify for the head of household filing status instead if you're living apart and separated but not yet divorced. This can be particularly advantageous.
You cannot have lived together during the last six months of the year. Additionally, your home must have been at least one of your children'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 to qualify as your dependents. You must have paid for more than half the cost of maintaining your household.
You can claim the tax deductions and credits that would otherwise be unavailable to you if you're eligible to file as head of household rather than MFS.
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 regardless of whether you personally earned it. Each spouse must report half the total community property income on his or her separate tax return, even if you never worked a day all year.
Deductions are also split in half with each spouse reporting half the deduction on his 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.
The community property states are California, Arizona, New Mexico, Texas, Louisiana, Nevada, Idaho, Washington, and Wisconsin as of 2019.
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 that year.
In either case, you must submit an amended tax return, Form 1040X, if you want to change your filing status after filing your tax return.