In most cases, married couples are better off electing joint status when filing their income tax returns. But in a few situations, electing to file as “married filing separately” (MFS) can be the wiser approach.
(Note: If you were married on December 31, you generally must file as either married filing jointly or MFS for the entire year.)
Electing MFS Lowering Combined Taxes
Electing MFS may lower a couple’s combined taxes in certain situations. For example, in noncommunity property states, when one spouse has a disproportionate deduction of a type subject to reduction by a percentage of income (such as medical expenses, casualty losses, and miscellaneous deductions), filing MFS may produce a lower overall tax liability for the couple.
If you live in a noncommunity property state, electing MFS means you’ll only report income that you earned and deductible expenses that you paid as an individual. The nine community property states, however, generally allocate community income and expenses equally to each spouse, regardless of who actually earns or spends the funds. Thus, in some circumstances electing MFS is less likely to benefit residents of community property states.
Electing to File Jointly
Couples who file jointly are jointly liable for that year’s return, which means the IRS can pursue either spouse for all or any part of their combined taxes. If you file MFS, you’re only liable for the tax that’s shown (or should be shown) on your own return. Therefore, MFS status may be desirable if one spouse wants to avoid liability for the other’s possible actions. This might apply where divorce or separation is a possibility or the other spouse is not reliable regarding tax or financial matters.
Some credits and deductions aren’t available or are subject to stringent limitations under MFS status. When considering this election, always calculate your tax both ways before filing.