Married couples filing taxes must decide whether to file jointly or separately each year.
Although joint returns are typically favored, tax experts suggest that some spouses may benefit from filing taxes separately in certain situations.
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- Married couples must choose whether to file taxes jointly or separately each year.
- Filing jointly is usually better due to wider tax brackets and higher standard deductions.
- However, filing separately may benefit some by avoiding inflated student loan payments or maximizing itemized deductions.
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Why Married Couples Should Consider Filing Taxes Separately
The Basics: Joint vs. Separate Filing
“Married filing jointly” combines a couple’s income, credits, and deductions onto a single return.
“Married filing separately” means spouses file their returns with individual earnings and tax breaks.
According to IRS estimates for 2021, around 3.9 million taxpayers filed separately compared to over 54 million who filed jointly.
The Joint Filing Advantage
“I would say 99% of the time, it’s better to file a joint return,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando.
When filing taxes, it’s usually better to file jointly.
It comes with wider tax brackets and a higher standard deduction.
In 2023, the 10% tax bracket for joint filers will start at $22,000 in taxable income, while for separate filers it will be just $11,000.
When Separate Filing Makes Sense
Despite the general advantages of joint filing, experts say there are scenarios where filing separately can pay off:
- Avoiding the ‘Phantom Tax’ on Student Loans:
If you file your taxes jointly, your income-driven student loan payments may significantly increase.
This is because your payments are calculated using your most recent tax return income.
It’s important to remember this to avoid any unexpected increases in your payment.
“With lower earnings and higher student loan balances, this could be particularly important for women,” said Marianela Collado, a certified financial planner, CPA, and CEO of Tobias Financial Advisors.
While you may owe more tax by filing separately, avoiding inflating your student loan bill could be worthwhile.
2. Maximizing Itemized Deductions
If you file taxes in 2023, the standard deduction is $13,850 if you file separately and $27,700 if you file jointly.
If one spouse deducts a lot for medical expenses, charitable donations, etc., it might make sense to file separately to save more on taxes.
However, if one spouse decides to itemize their deductions, the other spouse won’t be able to take the standard deduction.
The Potential Downsides
While separate filing can offer tax savings in some cases, there may be tradeoffs to consider:
- Limited ability to contribute to Roth IRAs due to lower income limits
- Ineligibility for certain tax credits like child care, education, and student loan interest
- Overall, higher tax liability due to”penalties” in the tax code for separate filers
As Collado states, “You basically get penalized [by the tax code] for filing separately.”
Weighing the Options
There’s no one-size-fits-all answer when filing taxes jointly or separately.
Your situation needs to be analyzed each year to determine the most tax-efficient filing status.
Speaking with a qualified tax professional can ensure you take advantage of all available deductions and credits while avoiding unintended consequences.
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