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When Married Filing Separately Will Save You Taxes

Updated for Tax Year 2017


OVERVIEW

If you're married, there are circumstances where filing separately can save you money on your income taxes.


The Internal Revenue Service considers wedded taxpayers married if they are legally married under state law, live together in a state-recognized common-law marriage, or are separated but have no separation maintenance or final divorce decree as of the end of the tax year.

married filing taxes separately

Of the 56 million tax returns married couples filed in 2009, the latest year for which the IRS has published statistics (at the time of writing), 4.3 percent belonged to twosomes who filed separately. These partners reported individual income and expenses on individual tax returns. They had to agree on either itemizing expenses or using the standard deduction. By filing separately, their similar incomes, miscellaneous deductions or medical expenses likely helped them save taxes.

Filing separately with similar incomes

A couple may pay the IRS less by filing separately when both spouses work and earn about the same amount. When they compare the tax due amount under both joint and separate filing statuses, they may discover that combining their earnings puts them into a higher tax bracket. Their savings depends on a variety of other factors, however, including their investment situation and whether they have children. The "married filing separately" status cuts the deductions for IRA contributions and eliminates child tax credits, among other tax breaks.

Using miscellaneous deductions by filing separately

Miscellaneous deductions can lower taxable income, but in order to enter them on Schedule A, they must add up to more than 2 percent of adjusted gross income (AGI). Spouses with union dues, job-search costs, tax-preparation fees and unreimbursed business expenses may find their miscellaneous deductions don't qualify when their higher combined income raises their AGI. A spouse who travels frequently for business could rack up a sizable tally in airline fees for baggage and itinerary changes that makes the miscellaneous deduction worth pursuing.

Filing separately to save with unforeseen expenses

Adjusted gross income also determines if a couple can use unreimbursed health care costs and casualty losses on Schedule A to save taxes. Unless out-of-pocket medical expenses exceed 10 percent of AGI, they don't qualify as a deduction. Casualty losses must also total more than 10 percent of AGI. The spouse with the loss or substantial medical outlay calculates deductibility against his own, lower AGI when he and his partner file separate returns. When one spouse can lower taxable income this way, married filing separately might trim a couple's overall tax burden.

There was a temporary exemption from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. If you or your spouse were 65 years or older or turned 65 during the tax year you are allowed to deduct unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income. The threshold remained at 7.5% of AGI for those taxpayers until Dec. 31, 2016.

Filing separately to guard the future

When you don't want to be liable for your partner's tax bill, choosing the married-filing-separately status offers financial protection: the IRS won't apply your refund to your spouse's balance due. Separate returns make sense to prevent the IRS from seizing a spouse's refund when the other has fallen behind on child support payments.

Couples in the process of divorcing may shun joint returns to avoid post-divorce complications with the IRS, while a spouse who questions her partner's tax ethics may feel more comfortable living a separate tax life.

All couples living in community-property states must consider state law when deciding how to file.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


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