Table of Contents
Advantages of married filing separately for tax return as compared to filing jointly
For the filing of taxes, married couples have multiple options when it comes to filing their returns. The common way of filing for married couples is the married filing together. However, there are benefits for married couples filing separately, such as financial, legal, and personal reasons. Even though filing separately is not the preferred method of filing taxes for married couples, there are certain circumstances where filing separately is the preferred option for couples.
In this article we tend to find the advantages of married filing separately and why it is a better choice as compared to joint filing. There are certain tax benefits which we tend to explore in this article like exemptions, deductions, and other special unique scenarios.
For filing separately:
Each spouse has to report their individual income which includes their wages, self-employment income (if any) and earnings gained from investment. Spouse can claim their own deductions, credits which are subject to certain restrictions. Each spouse has their own tax liability, which can vary based on various factors discussed in this article.
Benefits of Married Filing Separately
There are specific circumstances in which married filing separately can provide financial or other legal benefits. Following are some of the ways in which filing separately can be beneficial for couples.
Separate Tax Return and Safeguarding from spouse’s income tax return liabilities
To avoid your spouse’s tax liabilities, you can choose to file them separately. This is important because when filing together, both spouses are responsible for each other’s taxes that are owed. This can get problematic if one or both don’t agree with each other’s financial situation. This includes accountability that comes from the underreporting of income, false declaration of deductions, or indulging yourself in tax fraud.
If you think that your spouse is not just when it comes to their tax returns, or if they have a prior record of tax issues, then filing separately might be your best choice as it saves you from being held accountable for your spouse’s mistakes.
File jointly vs. separately in terms of medical expenses
When spouses file separately, then this can provide a benefit in terms of deductions in terms of medical expenses. The IRS offers deductions in terms of medical costs that are more than 7.5% of the adjusted gross income. Consequently, the combined adjusted gross income is used to estimate your eligibility for this deduction. Therefore, filing separately provides you the option of lower adjusted gross income, which provides each spouse or both the option of claiming a better percentage of relief for medical expenses.
Married Couple Filing Status Affect on Student Loan Interest
For spouses that have income-derived student loan payment plans, filing separately lowers the monthly installments and consequently lowers the student loan interest rate, too. Payment plans that are driven by income are based on the monthly payment plans and the borrower’s income. Separate filing makes sure that only a single spouse is needed for the calculation and estimation of the loan repayment.
Jointly or separately scenarios in terms of getting out of challenging tax credits and deductions
There are certain tax situations that can get you and your spouse into a predicament. These can be when the joint income of the couple is too much, then many tax benefits can be removed if the couple files jointly.
So, filing separately allows you to get the benefit of certain tax credits. For instance, the child tax credit can be removed at higher income levels. Filing separately can assist any of the spouses in getting the credits, even in the scenario where one spouse has a significantly lower income.
Married filing separately works for non-taxable income.
There are cases where a spouse might have income exempt from taxes, like social security benefits, and is eligible for exceptional cases under the tax code. However, if you file jointly, the IRS can add the income of both spouses together; this can make any of the spouse’s income into a taxable range or make one spouse less favorable in terms of tax treatment.
Therefore, filing separately can assist the non-taxable income from being taxed as the income of each spouse is recorded separately.
Divorce couple tax return scenarios and paying taxes separately
For couples who have been divorced or separated legally, filing can make sure that your taxes are filed separately. This means that the tax process is seamless and each spouse is responsible for each other’s tax liabilities. Furthermore, in the case of divorce, there can be on going court disputes for which both the parties will want to file separately and make sure that they avoid of getting intertwined in each others tax issues.
Avoiding Accountability for Unpaid Taxes or Penalties
For married couples that are dealing with unpaid tax returns or tax filing status from the prior years, filing separate returns is better than paying taxes jointly. This is an even more favorable situation for those couples who file taxes and have significant debts, or they have tax bills existing from the past.
In this regard, filing jointly or separately can affect tax deductions and tax rates as well. This ensures that tax professionals treat both spouses’ tax brackets separately. This means that the IRS cannot add a spouse’s income to another spouse’s debts when it comes to filing your taxes. So, filing a joint return might not be the best option in this regard.
Other important aspects for married filing jointly or separately
As you now know, there are many advantages to filing separately. There are also many demerits, like filing separately, which can make you miss out on many tax allowances like the earned income tax credit, child tax credit, and education credits, to name a few. These tax credits are reduced or removed. Therefore, filing separately may make you miss out on a lot of tax savings and benefits, which brings a higher tax bracket criteria to your tax year income tax return.
State-Related Specifications for filing jointly vs. separately
There are pros and cons in this regard in terms of state specific rules and requirement for filing jointly or separately.
There are own state-specific rules on the lower tax brackets and high tax brackets as well. For instance, state tax law in some states might not recognize the subtractions and credits which can impact the perks of filing separately.
Difficult to file taxes jointly vs separately
Filing separately is a more time consuming and complex process, this is especially for calculation of deductions and credits and other tax advantages’ too. Like if one spouse has claimed tax benefits, the other spouse might not be liable for benefits like the child tax credit. Furthermore, it can also make the property state filing difficult or make difficult to obtain tax breaks.
Final remarks for separate tax returns and whether to file your taxes separately
The ultimate decision to file separately vs together depends upon your specific situation, financial stance, and tax situation. There are numerous advantages and disadvantages, as you protect yourself from a spouse’s tax accountability, more deductions, and medical expenses as well. We advise you to consider your own financial situation or consult with a tax professional so that you can better get an estimate of whether to file together or separately.
GET FREE QUOTE FOR ALL OF OUR SERVICESÂ
Black Ink will send you a free analysis of your current state and what would be the cost of managing either a separate accounting and bookkeeping services or a complete solution across New York, USA. Do get in touch and we will be happy to consult you with our bookkeeping services in NY, New York, USA.
