When Does It Make Sense for Married to File Taxes Separately?

Sometimes filing separately can get you a bigger tax refund.

Sometimes filing separately can get you a bigger tax refund.

Though you share a lot after tying the knot, whether you begin sharing tax returns is still your call. The tax code gives married couples the option of filing a joint return or separate returns. You make this choice every year, so you're not locked in to your decision for future years. Taking the time to run the numbers on filing your taxes both jointly and separately allows you to pick the better option for you.

Medical Expenses

The medical expenses deduction only allows you to write off the portion of your costs that exceeds 10 percent of your adjusted gross income. As a result, the higher your income, the smaller your deduction. For example, if you pay $4,000 of medical expenses and your AGI is $40,000, you don't get to write off anything. But, if it's only $20,000, you get a $2,000 deduction. If you're married and one spouse makes less than the other but has substantial medical bills, you may save money by filing separate returns so the spouse with the smaller income can claim a larger medical expenses deduction.

Miscellaneous Expenses

The miscellaneous deduction has an AGI threshold that limits the deduction to the portion of the deductible expenses that exceed 2 percent of your adjusted gross income. Though it sounds broad, the deduction limits qualifying costs to things like unreimbursed employee expenses, tax advice fees and investment expenses. For example, if you pay out of pocket for a number of job expenses, like profession association dues, continuing education courses and malpractice insurance, you could save money on your taxes by filing separately so you have a larger deduction.

Questionable Tax Reporting

A non-financial reason you might consider filing separate taxes from your spouse is if you're questioning how your mate reports income and deductions on taxes. When you sign a joint return, you're saying that the information on it is correct. Though the Internal Revenue Service does have innocent spouse protection that limits your liability, you have to show that you really didn't know what was going on. If you file separate returns from the start, you have a better defense if the IRS comes knocking.

Limitations on Filing Separately

Filing separate returns has a number of drawbacks which may result in a bigger refund when filing jointly. For one, the tax brackets are narrower at the lower end of the income scale for those filing separately, so you get into the higher marginal rates faster. For example, for the 2013 tax year, if you file separately, the first $8,925 of taxable income for each spouse is taxed at 10 percent, the next $27,325 at 15 percent, and the next $36,950 at 25 percent. If you file jointly, the first $17,850 is taxed at 10 percent, the next $54,650 is taxed at 15 percent and the next $73,900 is taxed at 25 percent. Some deductions aren't allowed at all if you file separate returns. For example, the IRS prohibits anyone using the married filing separately status from claiming the student loan interest deduction, the earned income credit and various credits for educational expenses.

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