How to know when married filing separately makes sense, according to tax experts

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Married couples have an important choice every year: filing taxes jointly or separately. While the tax code generally favors joint returns, some spouses may benefit from filing apart, experts say.

“Married filing jointly” combines income, credits and deductions on a single return, whereas “married filing separately” creates two returns with individual earnings and tax breaks.

“I would say 99% of the time, it’s better to file a joint return,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

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For 2021, roughly 3.9 million taxpayers chose “married filing separately” and more than 54 million picked “married filing jointly,” according to IRS estimates.

Generally, married filing jointly is more generous due to wider tax brackets and a bigger standard deduction, Lucas said. For example, the 10% bracket kicks in with $22,000 in taxable income for joint filers, versus only $11,000 for couples filing separately for 2023.

However, there are scenarios when filing separate returns can pay off, he said.

Avoid the ‘phantom tax’ for student loans

Income-driven student loan repayment plans are one reason to consider separate returns, according to Marianela Collado, a CFP and CEO of Tobias Financial Advisors, based in Plantation, Florida. She is also a certified public accountant.

Here’s why: Income-driven student loan payments factor in earnings from your most recent tax return. That means a lower-earning spouse with student debt could see significantly higher monthly loan payments by filing taxes jointly, she said.

With lower earnings and higher student loan balances, this could be particularly important for women.

While you may owe extra taxes by filing separately, you could avoid the “phantom tax” of higher monthly student loan payments, Lucas said.

Maximize itemized deductions

Another reason to file separately could be to maximize itemized deductions, such as the tax break for medical expenses or charitable gifts, Lucas said.

Every year, taxpayers choose the standard deduction or itemized deductions, whichever is greater. For 2023, the standard deduction is $13,850 for filing separately, which is easier to exceed than $27,700 for filing jointly.

However, if one spouse itemizes, the other can’t take the standard deduction, which can increase their tax liability, Lucas warned.

You could be ‘penalized’ for filing separately

While filing separately may offer savings in certain scenarios, there could be other unexpected tax consequences, said Collado.

“You basically get penalized [by the tax code] for filing separately,” she said.

For example, separate filers typically can’t make Roth individual retirement account contributions because the modified adjusted gross income limit is $10,000. 

Plus, you may lose credits such as the tax break for child and dependent care, education and student loan interest, among others.  

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