New clients often inquire about the advantages of filing income tax returns separately, or as a couple. We have cited the advantages and disadvantages of a married filing separately income tax return. Hopefully, it will benefit you to review the advantage, versus the disadvantages. And our tax preparers will be able to help you determine the best options for your particular situation.
There are a few good reasons why the married filing separately status might not be a good idea. But the biggest is forfeiture of several major tax credits and deductions that are available to those who file jointly. Examples of these are:
Earned income credit
Child tax credit
Child and dependent care credit
Student loan interest deduction
Elderly and disabled credit
Also included are all deductions and credits of every kind relating to education. Such as the Hope and Lifetime Learning Credits, student loan interest deduction, and tuition and fees deduction
And the adjusted gross income (AGI) phase-out threshold of $0-$10,000 for Traditional IRA deduction.
Both spouses must choose the same method of recording deductions when married filing separately. So if one spouse decides to itemize deductions, then the other spouse must do so as well. And it doesn’t matter if his or her itemized deductions are less than the standard deduction.
There are those occasions where a married couple may want to file separately. An this might be a better idea for the following reasons.
Liability Issues – Originally, this status was created to accommodate divorcing or separated couples. Because these couples are not willing to file their taxes jointly. But it may also be appropriate if one spouse suspects the other of tax evasion. Because the innocent spouse should file separately in order to avoid potential tax liability for the other spouse. And this status can also be elected by one spouse if the other refuses to file.
Diverse Pay/Deduction Scales – Childless couples where one spouse has considerably higher income and the other spouse has substantial potential itemized deductions.