Navigating the tax code as a married couple can be confusing. Most married couples have two options when filing: Married Filing Jointly or Married Filing Separately. Which would be best for you and your spouse?
To file jointly, you must be married on the last day of the tax year even if you did not live with your spouse. You may be separated and in the process of a divorce but if the decree is not final and you agree to file together, you may file jointly. If your spouse dies during the tax year, you are still considered married to that spouse at the end of the year. To use the MFJ filing status only one has to have an income, but all income must be included from both. You are both responsible for the return and must sign the return (electronically). Filing a joint return may give you a lower tax rate than any other filing status.
If you are divorced by the last day of the year, you are considered Single for the entire year and may not file a joint return.
Married Filing Separately can be chosen if you are married and want to be responsible for only your own taxes. MFS usually means paying more tax than if you file a joint return.
Filing separate returns status disqualifies you from certain tax benefits. Some are:
- You cannot claim the standard deduction if your spouse itemizes
- You cannot claim the earned income credit
- You cannot take the credit for adoption expenses
- You cannot claim the credit for child and dependent care expenses in most instances
- You cannot claim education credits
- If you lived with your spouse at any time during the year:
- You cannot take the credit for the elderly or disabled
- You cannot roll over amounts from a traditional IRA into a Roth IRA
- You may have to include in income more of your social security benefits
- You will be taxed at the single rate and W2 withholding may not be sufficient
Many times people want to file MFS because of a debt owed by the other spouse. In most cases, when a refund is due, it is wise to file an “Injured Spouse” form. This allocates income to each spouse and figures the portion of refund due to each spouse.
There are times when MFS is an advantage.
- One person is working the other only on Social Security
- One person has high W2 wages and the other has Unreimbursed Employee Business Expenses
- Certain income tax thresholds
All individual tax matters are different. This is not intended as a thorough, in-depth analysis of specific issues or tax advice. Please call us at 231-946-0003 for specific tax advice.