Married Filing Separately: When You Should File Your Tax Return Separately

Married filing separately is generally considered to be the least advantageous tax filing status, and with good reason. You’ll lose out on some tax credits if you file this way, as well the higher standard deductions and lower tax rates you'd qualify for if you filed a tax return jointly with your spouse. But there are also some advantages to filing separately.

Filing Statuses for Married Taxpayers

You might have three choices for your filing status if you got married but were neither divorced nor separated by court order by the last day of the tax year – Dec. 31. The Internal Revenue Service says you’re married in this case, so you're limited to filing a separate or joint married return in most cases.

You might qualify as head of household, however, if you and your spouse didn’t live together after July 1. But a lot of other complicated rules apply to claiming this status, so most married people are left with a choice between filing jointly or filing separately.

You must file a separate married return if your spouse won’t agree to file a joint return with you, assuming that you can't qualify as head of household. This means segregating your own taxable income and any deductions or credits you personally qualify for on your own tax return. You're prohibited from filing a return as a single taxpayer.

Liability Issues

Many spouses who file separate married returns decide to take the tax hit because they want to keep their finances separate for one reason or another. Maybe they’re in the process of divorcing, or they might just be contemplating divorce. They’d prefer to be liable for only their own tax debts and mistakes going forward.

The IRS holds married couples “jointly and severally liable” for errors, omissions and any taxes due on their jointly filed returns. It could come back to haunt you long after your divorce if your spouse was less than honest about their income or other tax details on that joint return you filed together. The IRS can come after you, too, if the tax owed on a joint return goes unpaid, even if you earn much less than your spouse or even no income at all.

Maybe your marriage is just fine but your spouse’s vocation is one that’s considered risky for audits. You might want to sever your liability and file a separate return in this case as well.

Disadvantages of Filing Separately – Lost Tax Credits

So what exactly do you stand to lose if you decide to play it safe and file your own separate tax return? One significant issue is that the Internal Revenue Code cuts separate married filers out of the loop with regard to claiming the earned income tax credit, the child and dependent care credit, the adoption credit, the credit for the elderly or disabled and the American Opportunity or Lifetime Learning credits for continuing education.

You’d additionally lose out on claiming the student loan interest deduction, and you’ll be limited as to how much you can contribute to a Roth IRA. Your child tax credit and retirement savings contribution credit will probably be less, even if you do qualify to claim either of them.

The IRS does offer two small loopholes, however:

  1. You might still be able to claim the child and dependent care credit if you’re filing a separate tax return because you’re separated from your spouse by court order but don’t qualify as head of household. 
  2. You can still claim the credit for the elderly and disabled provided that you and your spouse didn’t live together at any point during the tax year.

Unfavorable Tax Brackets and Rates

Unfortunately, the news gets worse from here. Married filers of separate tax returns are subject to higher tax rates than if they filed jointly.

As of the 2020 tax year – the return you'd file in 2021 – MFS taxpayers move into the 12 percent tax bracket when they earn $9,876. Spouses won't hit this threshold until they collectively earn $19,751 if they file jointly.

This trend continues as you climb up the income ladder and it gets even worse. Joint married filers don't move into the top 37 percent tax bracket until they reach incomes of $622,051 or more in 2020. This limit is close to half that for MFS filers – just $311,026. In fact, this is the lowest threshold of all five filing statuses. Even single filers can earn $200,000 more before hitting this tax bracket.

The rates in place for the 2019 tax year were stingier: Married filers who filed separately hit the 12 percent rate at incomes of $9,701, and they reached the 37 percent rate at incomes of $306,176 or more.

The MFS Standard Deduction

MFS filers share the same standard deduction with single filers, which is half what they could have claimed on a joint married return: $12,400 in the 2020 tax year versus $24,800 for joint married filers. These deductions increase a little each year because they're indexed to keep pace with inflation.

These deductions were slightly less for the 2019 tax year, just $12,200 for MFS filers compared to $24,400 for married taxpayers filing joint returns.

And married taxpayers who file separately must both claim the standard deduction, or they must both itemize on their separate returns. There's no mixing and matching here. Let’s say you file a separate married return weeks after your spouse files their separate return. Your spouse itemized their deductions. Now you no longer have the option of claiming the standard deduction, even if that’s more advantageous for you. You could take a nasty tax hit by being unable to claim the standard deduction instead if you have no itemized deductions of your own.

If You Have Dependents

No two taxpayers can claim the same dependent in any given tax year. You and your spouse could each claim one of them if you have two children, but you’ll have to figure out which of you is going to claim them as a dependent if you have just one child because you both can’t do so.

As a practical matter, the Tax Cuts and Jobs Act eliminated personal exemptions for dependents from the tax code through at least 2025, and you won’t qualify for as many child-related tax credits anyway if you file separately. But your dependents or lack of them might still affect how much you end up owing the IRS to some extent.

A Wrinkle With Community Property States

You might run into some complications with segregating your personal income and tax breaks if you live in a community property state. The federal government defers to state law in this case, and your state’s law might specify that your income is considered to be earned by both of you jointly.

The community property states are Louisiana, Texas, New Mexico, Arizona, California, Nevada, Idaho, Washington and Wisconsin as of 2020. You might want to consult with a tax professional if you live in any of these states and you’re contemplating filing a separate tax return. You're legally permitted to do so, but the calculations of separating income and deductions can get complicated.

When Filing Separately Makes Sense

So why would anyone ever file this way if they weren’t worried about tax liability issues? In some isolated cases, it can actually be advantageous.

Some tax deductions – most notably the itemized deduction for medical and dental expenses – depend on your adjusted gross income. You can only deduct the portion of your expenses that exceed 7.5 percent of your AGI in tax year 2020, and this might potentially increase to 10 percent) in 2021.

This threshold would be much easier to surpass and would result in more of a deduction if you earn $25,000 a year separately rather than $75,000 jointly with your spouse, and all those medical expenses you paid were your own. You would have to surpass 7.5 percent of your combined incomes if you filed a joint return.

Then there’s that nasty little wrinkle known as the “marriage penalty.” Sometimes spouses who each earn significant incomes can actually find themselves paying more in taxes when they file jointly because of the way tax brackets are set up. But the Tax Cuts and Jobs Act tweaked the brackets in 2018, so this isn’t so much of a problem anymore.

Changing Your Filing Status

You have limited time to change your mind if you decide you made the wrong decision and you want to go back and amend an old return to change your filing status. According to the IRS, you can only change a joint married return to a separate married return up until the due date of that return, typically April 15. So you only have three months or so to make it right if you file a joint return in January then get cold feet.

You have three years, however, if you want to change your separate returns to a joint married return. Again, the clock begins running with the due date.