Married taxpayers can file joint tax returns together, or they can file separate returns, but the "married filing separately" (MFS) status provides fewer tax benefits and is considered to be the least beneficial. But there are some advantages to this filing status, too, depending on your personal situation and where you live.
What Is Married Filing Separately Status?
If you are married and file separately, you’re only responsible for your own return, and thereby your own tax payments. Likewise, if you are due a refund, it will be delivered to the account you indicate on your return.
The income spans for tax brackets aren't as generous if you use the married filing separately status, and you'll be disqualified from claiming several tax deductions and credits. Plus, income phaseout limits for other deductions will be more prohibitive as well. The flip side is that you won't be liable for taxes on the income your spouse earned and you can't be held legally responsible for any errors or omissions on your spouse's return.
Some spouses just prefer to keep their finances as separate as possible.
When Should You File a Separate Return?
There are occasions in which you must file separately and some instances where it simply makes the most sense for your situation. What follows is a representation of some of these situations.
You Lack Spousal Consent
You must file a separate return if your spouse is unwilling or unable to consent to file a joint return with you. This is because both of you must sign the return when you file jointly. An exception to this rule exists when one spouse dies during the tax year. You can still file jointly for that year if you choose, but you can file separately as well.
Different rules apply to married couples filing separately in community property states (see Filing in a Community Property State below). This can impact the benefits or drawbacks of choosing MFS in those states.
There’s an Income Disparity
You might prefer an MFS arrangement if your income is low while your spouse’s is high, and you don't want responsibility for their tax bill. The Internal Revenue Service (IRS) can and will take steps to collect from you if your spouse refuses to pay a tax bill resulting from their income, even if it's more than you make in a year.
You Have Liability Concerns
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 on that return. This means the IRS can collect tax debts and penalties from each of you, and both of you are equally responsible for any errors or omissions on the return.
If you don’t trust your spouse, filing separately is one way to limit your liability. Or perhaps your spouse has outstanding debts, such as back taxes or past-due child support, that you don’t wish your refund to be directed toward.
An exception to liability exists if one spouse can prove a case for innocent spouse relief, establishing that they had no knowledge of the other's misstatement of tax information, so it would be unfair to hold them liable for any debt or penalties resulting from those misstatements.
You’re Applying for Certain Student Loan Repayment Plans
Another reason you may wish to file separately is to qualify for an income-driven repayment plan to lower federal student loan payments. The Income-Based and Income-Contingent Repayment Plans plus the PAYE Plan allow married borrowers who file separately (and are eligible for repayment under the specific plan) to have their payments determined based on their income alone.
You’re Getting Divorced or Are Separated
Divorce is often complicated and filing jointly may not be in your best interest. In addition to skirting liability issues, by filing separately you avoid a joint tax bill or a joint refund. If you have a refund coming, it will be direct-deposited into an account you specify.
If you have primary custody of your children and live separately from your spouse, you may qualify to file as head of household (below).
A Joint Return Wouldn’t Lower Your Tax Bill or Increase Your Refund
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.
How Married Filing Separately Status Impacts Taxes
Separately filing married taxpayers are prohibited from claiming several tax credits, including:
- Credit for the elderly and disabled (if they lived with their spouse)
- Child and dependent care credit (in most cases)
- Earned income credit
- American Opportunity or Lifetime Learning educational credits
MFS taxpayers also have lower income phase-out ranges for the child tax credit.
Deductions and Exclusions
Some tax deductions can become out of reach simply because both spouses must claim the standard deduction when they file separately, or they must both itemize their deductions unless one of them is eligible to file as head of household.
The income phase-out threshold for the IRA deduction is lower (if at least one of you is covered by a retirement plan at work), and some other deductions and exclusions are off-limits for MFS filers, including:
- Tuition and fees deduction
- Student loan interest deduction
- Tax-free exclusion of U.S. bond interest
- Tax-free exclusion of Social Security benefits
That said, MFS status can be somewhat more beneficial for taxpayers who want to claim the itemized deductions with income threshold requirements. For example, the medical expense deduction is only available for the portion of your expenses that exceed 7.5% of your adjusted gross income (AGI) as of the 2020 tax year. This can be a much lower threshold to meet on one income than on two combined incomes when you're filing jointly.
Your filing status also affects your tax rates. The following tax rates are in effect for those who are married but file separate returns in 2021 for the 2020 tax year.
|10%||$0 to $9,950|
|12%||$9,950 to $40,525|
|22%||$40,525 to $86,375|
|24%||$86,375 to $164,925|
|32%||$164,925 to $209,425|
|37%||More than $523,600|
These MFS brackets are the same as those that apply to single taxpayers with one major exception. The 35% tax bracket covers income up to $518,400 for single taxpayers, but those who are married and file separately hit the highest tax bracket of 37% at incomes of just $311,025—a difference of over $200,000.
The difference is even more pronounced if you file a joint return with your spouse. In this case, the 37% bracket doesn't kick in until incomes reach $622,051 as of the 2020 tax year.
No two taxpayers can claim the same dependent unless they're married and file a joint return. Married taxpayers who are parents and who file separately must decide which of them is going to claim their child as a dependent for various tax breaks.
Your kids don’t have to be a package deal if you file separately. Each of you can claim one child if you have two children, or one of you could claim two or three if you have four children, leaving the other dependents for the other spouse.
The IRS will award the dependent to the parent with whom the child lived most often during the tax year if the agency must decide the issue. It will give the dependent to the parent with the highest adjusted gross income (AGI) by default if parents live together.
Can You Change Your Filing Status Once You’ve Filed?
Married couples should decide whether to file jointly or separately when they prepare their original tax return for the year. But, generally, 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, including extensions.
They can change their minds and switch from a joint return to two separate returns only by the tax deadline for that tax year.
You must submit an amended tax return, Form 1040X, if you want to change your filing status after filing your tax return.
The Head of Household Option
You or your spouse—or perhaps both of you—might qualify for the head of household filing status if you're living apart. This is much more advantageous than filing a separate married return, but it comes with a lot of qualifying rules.
You can't have lived together during the last six months of the year to qualify if you’re not divorced yet. Additionally, your home must have been the primary residence of at least one of your children 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, but you must have paid for more than half the cost of maintaining their household.
You must pay for more than half the cost of your household if your dependent lives with you.
You can claim the tax deductions and credits that would otherwise be unavailable to you if you’re eligible to file and do file as head of household (rather than MFS).
Married Filing Separately in a Community Property State
Couples who reside in one of the nine community property states must follow special rules for allocating income and deductions when they file separately. The community property states are California, Arizona, New Mexico, Texas, Louisiana, Nevada, Idaho, Washington, and Wisconsin as of 2021.
Community property and income are considered to be jointly owned by both spouses. If your spouse earns $80,000, half of that is attributable to you regardless of whether you personally earned it, in most cases. Each spouse must report half the total community property income on their separate tax return, even if one never worked a day all year.
Deductions are also split in half, with each spouse reporting half the deduction on their separate return. These rules apply even if just one spouse lives in a community property state.
Frequently Asked Questions (FAQs)
Does filing separately affect taxes on Social Security benefits?
If you don't live together, are making under $34,000, and plan on filing Married Filing Separately, then Social Security benefits may only be taxed up to 50%. If you have lived together or make more than $34,000, the benefits can be taxed up to 85%.
Is there a penalty for filing Married Filing Separately?
There isn't a penalty for filing Married Filing Separately. However, there are tax breaks that you're no longer eligible for when not filing jointly. Most tax professionals consider this status as being the least advantageous for those involved.