Filing Jointly vs Separately [An Ultimate Guide for Married Taxpayers]

Marriage offers many benefits and filing taxes together numbers as one of them. But does that mean that when you’re married you’re obligated to file your income tax returns jointly with your spouse? No, it doesn’t.

The debate on filing jointly vs separately is something most couples have to consider, and if you still haven’t decided how to file your own taxes, keep reading and find out what is the best option for you.

Married Filing Jointly vs Married Filing Separately

Married taxpayers usually file their returns jointly, since that is what makes the most sense for the majority of couples. However, there are some unique situations when it would be better to file separately and get a bigger tax refund than you would if filing jointly. In order to decide what is the right choice for you as a couple, consider your income and expenditures.

How to file your taxes and what is the difference between married filing jointly and married filing separately?

All married couples can file jointly by reporting their taxable income, expenditures, and deductions on one Form 1040, or if they opt for filing separately, each of them has to fill out their own Form 1040 based on their individual income.

While there are some minor differences when filing jointly vs separately, there isn’t a significant difference in the filing process itself. Even if you opt for filing separately, you still need to provide some information about your spouse, such as your spouse’s full name and date of birth and their Social Security Number or ITIN (Individual Taxpayer Identification Number).

Whichever filing system you choose, you need to be aware of the taxes and deductions you are responsible for by deciding on that particular option, and also, you need to remember that you can change your mind at any point during the process.

If you ever found yourself perplexed by taxes, you don’t have to wait any longer to find out why taxes are so complicated!

What does filing jointly mean? 

If a couple decides on filing jointly, there are various benefits, deductions, and tax breaks that might not be available when filing separately. However, there are a few conditions that have to be met (besides being married) that a couple has to meet in order to be eligible for filing jointly: they both have to agree on filing jointly, they have to report combined income and deductions, even if one spouse does not have any income or deductions and they both have to accept equal responsibility.

Is it better to file jointly?

In most cases, it is better to file jointly because you get a lower tax rate and you are eligible for benefits that are not available to those filing separately. You still need to consider your tax brackets, your taxable income, and the deductions and tax credits you might qualify for. It is evident that filing jointly is the preferred option for the majority of couples since 95% of married taxpayers chose this as their preferred method. For some couples, however, the wiser thing to do might be to file separately.

Benefits of filing separately

Some people wish to retain their financial independence even when they are married. If you’re one of them and you’re wondering ‘do married couples have to file jointly?’, the answer is no. There are some benefits to consider when filing your tax returns separately from your spouse.

One of the benefits is avoiding a higher tax rate if you have higher income thresholds as individual earners, as well as the benefit of security from prosecution in case of any illegal action of your partner.

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When to File Jointly

Lower tax rate

In many cases, the tax rates are significantly lower when filing jointly. In case you were wondering ‘should I file jointly or separately’ you need to know that there are certain benefits you are entitled to only when submitting joint returns.

More credits and deductions

When you are filing jointly you can get many more credits and deductions, such as Earned Income Tax Credit (EITC), The Child and Dependent Care Tax Credit, American Opportunity, and Lifetime Learning Education Tax Credits, as well as adoption credit.

You can deduct retirement account contributions

Couples filing together are eligible for the IRA contribution deduction as long as the modified adjusted gross income (AGI) on their joint return in 2021 is less than $208,000.

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When To File Separately

Someone has an unpaid student loan

You can ensure a lower monthly bill if the student loan interest payments are based on your individual income instead of on the joint income. In this case, filing jointly vs. separately should be a no-brainer – you can save a large amount of money by filing a single return. You can also consider checking out the best student loan repayment plans.

Someone has extensive medical bills

If you itemize, you can deduct qualified unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income (AGI). If one spouse has a lot of medical expenses and a lower income, filing separately may make it easier to cross the 7.5% income threshold to deduct the expenses.

You’re planning to divorce

Married filing jointly vs separately options are included on your tax forms primarily because of divorce. So, if you are in the process of divorcing your spouse or you’re undergoing a separation, the most advisable course of action is to also separate your finances and file separately.

To potentially save money

If both you and your spouse are high-income earners who earn approximately the same income, it is probably better to file separately, since the tax rates might be lower.

Liability issues

If one of the spouses has tax liability issues, the smartest thing to do is file separately to ensure that the other spouse is safe from any liability.

Deductions

When you believe you should apply for an itemized deduction separately from your spouse since their income might influence some of the deductions you are entitled to based on your personal income. This course of action makes sense if the deductions differ significantly.

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Key Takeaways

The filing status should be determined based on your tax situation – both spouses have to agree with the chosen filing status
The benefits of filing separately vs jointly can differ from couple to couple and are determined by a number of reasons
Married filing jointly is the better option in most cases
Filing separately can be a good idea in a number of scenarios
Prepare your tax returns both ways and see what is the smartest choice for you

Pros and Cons of Filing Taxes Jointly

Pros:

    • Tax-free exclusion – income that doesn’t have to be reported in your gross income, usually for Social Security benefits or interest gained through US bonds.
    • Access to various tax credits: Child Tax credit, adoption credit, Dependent Care Credit, as well as all education-related credits, such as student loans and lifelong learning programs.
  • Deduction on some retirement plan contributions – if you want to contribute to your retirement fund, a certain amount of these contributions can be deducted from your tax returns. However, only people with a joint yearly income not exceeding $208,000 can qualify for these deductions.
  • Credit for disabled or elderly status – if one of the spouses is in some way disabled or requires elderly care, there is no doubt when it comes to filing jointly vs separately – couples that file jointly can receive significant deductions for these expenses.

Cons:

  • Shared responsibility – you will be legally responsible for whatever your spouse files on your joint tax return. If you don’t have complete confidence in your partner, filing jointly might not be the best option for you.
  • Medical costs might not be deducted – if you apply jointly, your combined income will probably make you ineligible for reimbursement for any medical expenses you might have.

Pros and Cons of Filing Taxes Separately

Pros:

  • Separation of tax liability – if you want to avoid liability for any of your spouse’s financial choices, married filing separately is the way to go for you. In this way, you can protect yourself from any accusations of tax evasion or fraud and spare yourself an audit.
  • Higher itemized deductions – the itemized deductions one spouse might be entitled to can help lower the overall tax exposure. This is a good idea if one spouse’s deductions are large enough to make up for the other spouse’s lost deduction amount.
  • State-by-state considerations – by filing separate state returns you can significantly cut your state tax bill. Since your state makes you file using your federal filing status, you should decide whether to file separately or jointly. Separate filing is only advisable as long as the gains you get from the lower state tax are greater than the cost of separate returns for the federal income tax.

Cons:

  • No access to certain tax credits – you cannot claim the credits for child care, dependents, or any of the education tax credits.
  • Fewer deductions and tax considerations – if your spouse itemizes deductions, you cannot claim standard deductions, unless you itemize as well. If you can claim the standard deduction, the amount of your deduction will be half of what it would be on a joint return.
  • Higher tax rates with more tax due – in general, the tax rates are higher for married filing separately vs jointly, so in all probability, you will owe more in taxes, unless both spouses are high earners.
  • Lower retirement plan contributions allowed – if you and your spouse lived together at any point in the fiscal year, you may not be able to deduct some or all of your contributions to a traditional IRA if your income is over a certain amount. This deductible amount is much lower on a single return than on a joint return.

Conclusion

When deciding between married filing jointly vs married filing separately, you need to take all aspects of your financial situation into consideration. The most popular course of action is to file jointly, but that doesn’t have to mean it is the proper course of action for you as a couple or for you as an individual. Explore your options and do what’s best for you!

FAQ

When should married couples file separately?

Married filing separately should be preferred if you are going through a divorce or a separation, as well as a form of protection from your spouse’s potential liability for fraud or tax evasion. Also, when both spouses are high earners or one of them is eligible to claim higher deductions.

Is it better to file jointly or separately?

It is generally believed that it is better to file jointly because of the numerous benefits that come with choosing this filing status. However, the determining factor is the couple’s specific financial situation that has to be assessed before deciding on a course of action.

What are the pros and cons of filing taxes jointly?

Filing taxes jointly has both its benefits and downsides. The major pros for filing jointly are lower tax rates and eligibility for a large number of credits and deductions. The main downside is the shared responsibility and liability for any irregularities. Eligibility for medical reimbursement can also suffer when filing jointly.

Do you get a bigger refund filing jointly or separately?

When choosing between filing jointly vs separately, you need to keep in mind that in most cases filing jointly allows you to claim a bigger refund, but since that is not a 100% guarantee in all cases, you should prepare your returns both ways and decide what is the best course of action for you.

ABOUT AUTHOR

I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc. After that, I got exposed to other verticals such as wealth management and personal finance, which further improved my understanding of the financial world.

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