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Separate tax return filing considerations for married couples

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Unsplash+ in collaboration with Meg Aghamyan


First comes love.
Then comes marriage.
Then comes filing your taxes
together in one package.


Or not.

OK, I pushed it trying to rhyme marriage and package. Now it's clear why I stick to prose instead of poetry

And that "or not" stanza is a bit counterintuitive on Valentine's Day, a time when we traditionally celebrate love and inseparability.

But we are talking taxes on this heart day, so there's always an exception.

Married filing options: It's true that most of the time, it's better to file one return jointly.

Not only is it easier, but when you're married, several tax breaks aren't available when spouses opt to file separate returns.

But it's also true that even the most committed married couples sometimes find that they're better off with each filing a separate Form 1040.

Here are six such instances, and a seventh consideration for community property state residents.

1. One spouse has large medical expenses. Many taxpayers who choose to itemize instead of claim the standard deduction usually go the Schedule A route because they have a lot of medical expenses. In order to get tax benefit of these costs, they must exceed 7.5 percent of your adjusted gross income.

If a husband or wife has enough costs to offset his or her separate earnings, it might be worth splitting tax returns. That will allow the ailing (and hopefully feeling better) spouse to meet the 7.5 percent requirement and deduct the amount in excess of that threshold.

2. One spouse makes a whole lot more money. Many well-to-do couples already have to deal with the top ordinary tax rate of 37 percent. But since 2013, some high-income taxpayers also have faced surtaxes.

For example, jointly filing married couples with a combined modified adjusted gross income of more than $250,000 in wages have to pay a 3.8 percent net investment income tax (NIIT). And that $250,000 income trigger is not indexed for inflation.

Plus, there's the higher capital gains rate of 20 percent instead of 15 percent. That kicks in for the 2023 tax year when joint filers make $553,851 or more.

If one spouse earns a substantially higher wage and/or is the sole owner of investment assets, it could be worth splitting returns. Yes, the higher earner likely will still owe the NIIT, which kicks in at $125,000 for married filing separately taxpayers. But the other spouse could have a much lower tax bill.

Determining whether splitting your wages and investment income tax liability and filing separate returns is worth it will take some work. But if you're making big bucks, you probably have a tax professional who can run the numbers for you.

3. You have student loan debt. Some student loan payments are based on income you report on your tax return. These income-driven repayment (IDR) plans often provide a lower monthly payment compared to other options. Filing separately and reporting your income alone could help you pay less on your educational loan each month.

4. Your spouse has prior family obligations. Many couples have had prior marriages and families. That also means money to care for those children from those relationships. If your husband or wife owes child support, the tax collector will take those overdue payments out of any federal refund. Do you want to surrender your part of the refund for your spouse's legal child care lapse?

5. Your spouse has a problematic tax history. Does your spouse owe Uncle Sam money? Has he or she ever been audited? When you review your joint tax return that your spouse fills out, does it look like he or she is taking some tax-filing liberties that could cause some potential problems?

If you file jointly, then you both are equally liable for what's on that one tax return you each signed. But if you have any concerns about what's on that sole 1040, especially if some claims seem legally questionable rather than just sloppy, then file your own separate tax return.

6. Your relationship status is changing. I'm not talking filing status here, but your relationship status. Just how do y'all feel about each other? Have you lost, as the song goes, that loving feeling? If you're pretty sure that you and your spouse won't be legally wed for much longer, it might be time to separate your taxes along with all your other goods.

7. Your state tax rules affect your federal return. Are you a legally wed couple in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin?

These nine states are community property states. This means any assets acquired by spouses throughout their marriage are owned as community property regardless of who bought them.

When married couples in community property states file separate returns, Uncle Sam requires each spouse to report on federal filings 50 percent of the spouse's income, as well as half the income generated by community assets, plus all of the filing spouse's separate income.

IRS Publication 555, Community Property, has more on these filings, as well as worksheets. If your community property state collects individual taxes, check with your state's tax department for your jurisdiction's filing details.

A couple of final couple filing issues: Finally, here are some basic marital tax matters to keep in mind.

Although you are filing your taxes this year, your couple filing status choice depends on your marital status on the last day of last year. Your couple or not situation as of Dec. 31 each year determines your filing status for that entire year.

So if  you and your better half were still legally wed on Dec. 31, then you can submit your taxes as married filing jointly or married filing separately.

But if your divorce was finalized on Dec. 31, then you're a single, or head of household if you got custody of the kiddos, taxpayer for the full previous tax year.

Also, as long as you stay married, you get to choose whether to file jointly or separately each filing season as your financial, tax, and relationship dictates.

As these couple filing situations show, taxes, like marriage, take work. So be sure you and your spouse put in the time not only on your relationship, but also on making the filing decision that works best for your taxes and your relationship.

And on this Feb. 14 (and beyond), here's wishing you a long and happy marriage, regardless of whether you file one or two 1040 forms.

You also might find these marriage-related posts of interest:



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