Once you’re married, you have two options when it comes to filing your annual federal income tax return — married filing jointly or married filing separately. While some couples may find it more tax-efficient to file separately, joint filing often is more advantageous.
Benefits of Filing Jointly
Married couples who file their federal income tax return jointly can frequently reduce their tax obligation with various breaks not available to those who file separately. For example, joint filers are entitled to a larger standard deduction. For 2024, the standard deduction is $29,200 for them but only $14,600 for married couples filing separately. That means joint filers would have less taxable income based on the same gross income. Joint filers are subject to the lowest tax rates, too.
Joint filers also can take advantage of certain tax credits that wouldn’t otherwise be available. These credits include the:
American Opportunity and Lifetime Learning education credits,
Credit (or exclusion) for adoption expenses,
Child Tax Credit,
Child and Dependent Care Credit, and
Earned Income Credit.
Joint filers also can benefit from higher income thresholds that apply to some taxes, deductions and retirement plan contribution limits. For example, the 0.9% additional Medicare tax generally applies to wages that exceed $250,000 for married filing jointly and $125,000 for married filing separately. Say one spouse earns $200,000 and the other earns $50,000. They could avoid the tax entirely by filing jointly, but $75,000 of the higher earner’s wages would be subject to it if they file separately.
Joint filers are allowed deductions for student loan interest and tuition and fees, too. And they can deduct up to $3,000 of capital losses per year, versus $1,500 each when filing separately.
Joint Filer Status Requirements
The IRS allows taxpayers to claim joint filer status if they’re married and agree to file a joint return. Under the tax rules, the term “married” also includes taxpayers:
Who live together in a common-law marriage recognized by the state where the marriage began (Alabama, Colorado, District of Columbia, Iowa, Kansas, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina or Texas),
Who live apart but aren’t legally separated, and
Whose spouses died during the year and who haven’t remarried.
The spouses generally must both sign the income tax return, although special rules apply when a spouse can’t sign because of death, illness or absence. Both spouses will be held responsible for any taxes owed.
What to Know about Filing Separately
For all the perks of filing jointly, it’s sometimes worth considering filing separately. For example, a married couple with no dependents or student loan debt who both have similar incomes might do so to avoid moving into a higher tax bracket.
It also could pay off if one spouse incurred a significant amount of medical expenses for the tax year. The medical expense deduction is allowed only for amounts that exceed 7.5% of adjusted gross income (AGI). It may prove easier to surpass that threshold with one income than with two.
Important: Each spouse can claim only the medical expenses he or she paid. The IRS will presume that expenses paid from a joint account where the spouses have an equal interest were paid equally by the two spouses.
The same reasoning applies to the deduction for casualty losses sustained in a federally declared disaster area. This deduction is allowed only for losses that exceed 10% of AGI. Similarly, it might be advisable to file separately if you or your spouse is enrolled in an “income-driven” student loan repayment program that bases required monthly payments on income.
Liability avoidance is another potential motivator for filing separately. If you’re getting divorced or separated (but not legally), and you’d rather not end up on the hook for your spouse’s tax obligations — or you’re wary of your spouse’s tax practices — separate filings can protect you.
As noted above, you might miss out on certain deductions by filing separately. You’re also limited in how you claim deductions. Spouses filing separately must take the same approach, whether itemizing or using the standard deduction, which could result in a larger overall tax bill. For example, if both spouses itemize, but one spouse’s itemized deductions are less than the standard deductions, your overall tax liability could be higher unless the other spouse’s deductions are large enough to make up the difference.
Further, when couples itemize, only one spouse can apply each deduction, regardless of whether both paid for an itemizable expense. However, you can split a deduction between spouses. When there are children in the mix, only one spouse can claim them as dependents. If the spouses don’t agree on who will claim a child, the parent with whom the child spent the most nights during the year is entitled to the claim. If a child spent an equal amount of time with each parent, the parent with the highest AGI gets to claim the child.
You’re Not Married to It
If you file your tax return separately and later realize it would have been more tax-efficient to file jointly, you’re not necessarily out of luck. You have three years from the due date of the original return to amend it. Contact your tax advisor to discuss what’s right for your situation.
PKS & Company, P. A. is a full service accounting firm with offices in Salisbury, Ocean City and Lewes that provides traditional accounting services as well as specialized services in the areas of retirement plan audits and administration, medical practice consulting, estate and trust services, fraud and forensic services and payroll services and offers financial planning and investments through PKS Investment Advisors LLC.
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