When it comes to filing taxes, most married couples choose to file jointly. But did you know that filing separately can sometimes save you money or provide other benefits? Let’s break it down.
1. Save Taxes When Both Spouses Have Similar Incomes
Filing jointly might push your combined income into a higher tax bracket, which means higher taxes. If you and your spouse earn about the same, filing separately can sometimes lower your overall tax liability.
Example:
When incomes are similar, filing separately might also help you keep certain deductions or credits that would otherwise phase out under a joint return.
2. Maximize Deductions for Medical Expenses
If one spouse has significant out-of-pocket medical expenses, filing separately could be a game changer. Medical expenses must exceed 7.5% of your AGI to qualify for a deduction. By filing separately, the spouse with the medical costs can claim them against a lower individual AGI, potentially qualifying for a deduction.
Key Tip:
This strategy works best when one spouse has substantial medical bills that wouldn’t qualify under the higher joint AGI.
3. Claim Casualty Losses in Federally Declared Disaster Areas
Casualty losses need to exceed 10% of AGI to be deductible. Filing separately allows the spouse with the loss to claim it against their lower AGI, increasing the chances of getting a deduction.
Did You Know?
Filing separately can help reduce the couple’s overall tax burden in these situations.
4. Protect Your Refund from Your Partner’s Tax Liabilities
Filing separately ensures that your refund isn’t applied to your spouse’s debts, such as unpaid taxes or overdue child support.
Why It Matters:
If your spouse owes money to the IRS or other agencies, filing jointly could put your refund at risk.
5. Simplify Taxes During Divorce
Filing separately is often the preferred choice for couples going through a divorce. It helps establish financial independence and avoids complications with shared IRS liabilities after the divorce is finalized.
Pro Tip:
If you have concerns about your spouse’s tax practices, separate filings might offer peace of mind.
6. Strategic Use of Deductions
Before 2018, miscellaneous deductions like job-related expenses or tax-preparation fees could only be claimed if they exceeded 2% of AGI. While these deductions aren’t available under current tax laws, understanding similar strategies can prepare you for future changes.
Reminder:
Always consult a tax professional to ensure you’re making the best decision for your specific situation.
Things to Keep in Mind
Community Property States: If you live in a community property state, state law may affect how income and deductions are divided when filing separately.
Deduction Agreement: Couples filing separately must agree to either both itemize deductions or both use the Standard Deduction. You can’t mix and match.
Is "Married Filing Separately" Right for You?
Filing separately isn’t for everyone, but it can be a smart strategy for couples with high medical expenses, significant casualty losses, or those in the process of divorce.
Ready to explore your options?
Contact us today to learn how we can help you navigate tax season and maximize your savings.
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