What are the pros and cons of filing Married Filing Separately?

Modified on Wed, 24 Jan 2024 at 12:08 PM

What are some advantages of filing Married Filing Separately?

  • You get to keep your tax liability separate from each other.

  • If there’s a large disparity in you and your spouse’s income, you’ll get to pay tax only on your income

  • If you’re legally separated, this is generally a good filing status. 

  • Sometimes, there's a lack of trust between spouses due to business activities or disagreements over tax positions. In those instances, married filing separately could be best. 

What are some disadvantages of Married Filing Separately?

  • Your tax liability is likely to be higher than if you filed jointly.

  • In most cases, you can’t take the child and dependent care credit. 

  • If your employer offers child and dependent care assistance, the amount you can exclude from your income is limited to $2,500 instead of $5,000.

  • In most cases you can’t take the exclusion or credit for adoption expenses.

  • If you received interest income from qualified savings bonds used for higher education expenses, you can’t exclude income

  • You can’t take the earned income credit

  • The alternative minimum tax exemption is half of the amount that would be on a joint tax return. 

  • The capital loss deduction is limited to $1,500 instead of $3,000

  • You can’t take the deduction for student loan interest or credit for higher education expenses such as the American opportunity and lifetime learning credits.

  • The child tax credit and retirement savings contributions credit are reduced at income levels that are half those for a joint return. 

  • If you lived with your spouse at any time during the tax year:

    • You can’t claim credit for the elderly or the disabled

    • You will have to include in a higher amount of income, up to 85%, of any social security or equivalent railroad retirement benefits you received.

More details can be found on the Married Filing Separately status at the IRS website. You can also see how this status compares to the Married Filing Jointly status here.

 

This content is provided for informational purposes only and should not be construed as tax, legal, financial, accounting, or other advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need advice specific to you.

 

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