What it means
The US Internal Revenue Service says a married person can choose married filing separately as a filing status. It may suit someone who wants to answer only for their own tax, or whose combined tax is lower on two returns.
Spouses who do not agree to file jointly must use it unless they qualify as head of household. IRS Publication 501 lists special rules for this status, and says that because of them you usually pay more tax than with another status you qualify for.
The tax rate is generally higher than on a joint return, and the alternative minimum tax exemption is half the joint amount. Most credits are cut or lost, including the child and dependent care credit in most cases, the education credits and the student loan interest deduction, and the earned income credit is lost unless you have a qualifying child and meet other tests.
Other rules apply when you lived with your spouse: you cannot claim the credit for the elderly or disabled, and up to 85% of social security benefits can be taxed. The capital loss limit is $1,500 instead of $3,000.
The standard deduction is also lower, being set by the IRS each year at half the joint amount, and both spouses must choose the same method, so if one spouse itemises the other cannot take the standard deduction. A separate return can help when AGI limits matter.
If your AGI is lower on a separate return, deductions limited by AGI, such as medical expenses, may be larger. Compare both ways before filing, and include state tax in the comparison.
Separated spouses have extra options. The IRS says a spouse who is legally separated or lives apart may still claim the dependent care credit on a separate return.
There are also special rules that let a separated spouse claim the earned income credit in some cases. Retirement accounts are affected as well.
The traditional IRA deduction phases out at a much lower income for separate filers who lived together. Rules and limits change each year, so read the current publication.
In practice
Real-world examples.
Example
A fictional couple compares a joint return with two separate returns. The joint return gives a total tax of $18,400, and the two separate returns give $19,100 combined. They choose the joint return and save $700.
Example
A fictional spouse has a capital loss of $10,000 and no gains. On a separate return she can deduct $1,500 this year, and $8,500 carries forward. On a joint return the limit would be $3,000.
Example
A fictional spouse has large medical bills of $12,000 and an AGI of $60,000 on a separate return. The IRS floor is 7.5% of AGI, for expenses not reimbursed, which is $4,500, so $7,500 is deductible if he itemises. On a joint AGI of $150,000 the floor is $11,250, and only $750 would be deductible.
Formula
Calculation
Cost of filing separately = Combined tax on two separate returns - Tax on a joint return. With $19,100 - $18,400 = $700.
Medical deduction = Medical expenses - 7.5% x AGI. With $12,000 - 0.075 x $60,000 = $7,500.
Capital loss carryforward = Net loss - Annual limit. With $10,000 - $1,500 = $8,500.
Worked comparison for the same couple. On a joint return the AGI is $150,000, so the medical floor is 0.075 x $150,000 = $11,250 and the deduction is $12,000 - $11,250 = $750. On the separate return the wife's AGI is $60,000, the floor is $4,500 and the deduction is $7,500, a difference of $7,500 - $750 = $6,750 in deductions, yet the couple's total tax is still $700 higher because of the credits and rates they lose.Case study
Seen in the real world.
This case study is fictional and illustrative. Carlos and Elena, both 41, in Austin, are considering filing separately because Elena has large medical bills. Carlos earns $90,000 and Elena earns $60,000, and Elena's medical costs are $12,000. A tax preparer runs both returns.
The separate returns lower Elena's medical floor, but they lose a credit and raise Carlos's tax rate. The joint return still gives the lower total tax, by $700. They also check state tax and student loan interest, which favour joint filing. They file jointly and keep the comparison in their records.
They plan to run the numbers again next year. The preparer also points out that the answer could change. If Elena's medical bills were much larger, or if one spouse had large losses or income-driven student loan payments to manage, the separate return might win. In this illustrative story the couple writes down the three figures that would flip the decision, so that next year's check takes minutes rather than hours.
Watch out
Common mistakes.
- Choosing a separate return without running a joint return comparison, since the status usually costs more.
- Forgetting that if one spouse itemizes, the other cannot take the standard deduction.
- Missing the loss of credits and deductions, such as the education credits and student loan interest deduction.
Questions
People also ask.
What is a separate return?
It is a tax return filed by a married person alone, using the married filing separately status. Each spouse reports only their own items.
Is filing separately cheaper?
Usually not. The IRS says special rules mean you usually pay more tax, but a few cases such as AGI-limited deductions can favour it.
Can spouses pick different deduction methods?
No. If one spouse itemizes, the other cannot take the standard deduction.
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