How Married Filing Separately Can Help Put Tax Laws In Your Favor

Many of us have heard that getting married comes with all sorts of tax benefits. So, why would it ever make sense not to choose the married filing jointly status?

The married filing separately tax status is, in most cases, less favorable than filing single, married filing jointly, or head of household. It involves recording all income, deductions, and exemptions on entirely separate tax returns. There are some unique cases where filing separately makes sense for one or both spouses, which will be discussed below.

Itemized Deductions

In some cases, where one spouse has significant itemized deductions and medical expenses above 7.5% of their adjusted gross income, couples can save tax money by using the separate filing. One spouse itemizing will result in the other’s inability to take the standard deduction, which is $13,850 for married couples filing separately for 2023. Basically, the total itemized deductions between the two spouses would have to be higher than $27,700 for it to make sense not to file jointly using the standard deduction.

Here is an example when married filing separately would result in tax savings:

• Spouse 1 makes $100,000 and has $40,000 in unreimbursed medical expenses.

• Spouse 2 is married to Spouse 1 and makes $250,000.

If this married couple filed jointly, their income would be $350,000 and the unreimbursed medical expenses above 7.5% of their income ($40,000 – .075($350,000) = $13,750) would be less than their standard deduction ($27,700 for married filing jointly).

However, if we consider each partner separately, Spouse 1 would have itemized deductions of $32,500 ($40,000 – .075($100,000)). It’s important to work closely with your tax professional to find the tax filing status that makes the most sense for you, given your level of income, deductions, and exemptions.

Student Loans

For public servants eligible for student loan forgiveness after a specified number of qualified repayments, getting married might result in some difficulty. Qualified repayment methods, including Pay As You Earn, Income-Driven Repayment, and Income-Contingent Repayment all will consider just your income if you choose married filing separately. But if you elect married filing jointly, both your income and your spouse’s income are considered.

If your spouse is a high earner, this could result in much higher payments before having your remaining balance forgiven. It’s important to work with both your loan servicer and your tax professional to figure out the best way to both minimize your taxes and maximize your amount forgiven.

Lack Of Trust

State laws vary slightly but when you file your federal tax returns jointly, you and your spouse have joint and several liability. This means that if one person can't pay an individual portion of the couple's taxes, the partner is on the hook for the entire bill. This also applies to penalties associated with fraud, late filing, or understatement of taxes due.

If you suspect your spouse of tax evasion or tax fraud, the married filing separately status may offer some protections on a federal level. If you are in this position, it’s important to work closely with your tax advisor and potentially even involve an attorney to understand the laws surrounding this.

Conclusion

The married filing separately tax status has some special cases where filing this way may make sense. It is an uncommon filing status, so it’s important to understand its nuances and specific advantages and disadvantages. Working with a qualified tax professional is essential to optimize your taxes and put you in the best financial position.

This article was originally published by me on Forbes.

This informational and educational article does not offer or constitute, and should not be relied upon as, tax or financial advice. Your unique needs, goals and circumstances require the individualized attention of your own tax and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its associates and affiliates do not provide tax or legal advice or services. Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates do not endorse, approve or make any representations as to the accuracy, completeness or appropriateness of any part of any content linked to from this article.

Cicely Jones (CA Insurance Lic. #: 0K81625) offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC). Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. Any compensation that Ms. Jones may receive for the publication of this article is earned separate from, and entirely outside of her capacities with, Equitable Advisors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC). AGE- 6190996.1 (1/24)(exp. 1/26)