Adam Zoll) Question:
Every year when I do my taxes I notice the "married filing separately"
option under filing status. In what circumstance would I be better off
choosing this over "married filing jointly"?
Answer: For the vast majority of married taxpayers,
"married filing jointly" is the way to go. In fact, just 4.5% of married
couples filed separately for the 2009 tax year, the most recent annual
data available. That represented 1.8% of all returns filed that year.
One of the main benefits to filing jointly, aside from simplicity, is
that it entitles the filers to use a variety of tax breaks, including education
credits such as the lifetime learning credit, deductions for student
loan interest, and the credit for child- and dependent-care expenses.
Married couples who file separately typically cannot use these credits
and deductions, meaning that they might be forfeiting significant tax
For married couples in which one spouse earns considerably more than
the other, joint filing also might take better advantage of tax-bracket
structure by keeping more of the high earner's income in a lower
bracket. For example, if one spouse has a taxable income of $90,000 and
the other a taxable income of $40,000, their combined income of $130,000
puts them in the 25% bracket. But if they file separately, the spouse
earning $90,000 moves up to the 28% bracket, meaning that about $20,000
in income is taxed at the higher rate (based on 2011 brackets and rates).
Taking Advantage of Certain Deductions
For some married taxpayers, however, filing separate returns
might be worthwhile. This is particularly true when spouses' disparity
in income allows them to take advantage of tax breaks that otherwise
would not apply. For example, let's say one spouse has an adjusted gross
income of $100,000 per year and the other has an adjusted gross income
of $25,000 per year, and that the lower earner accrues $5,000 in
unreimbursed medical bills that year. The tax code allows for deduction
of medical expenses that exceed 7.5% of your adjusted gross income
(after other deductions are subtracted). That $5,000 represents just 4%
of the couple's combined income, but 20% of what the lower-earning
spouse made alone. Therefore, filing separately makes sense in this case
as long as this deduction outweighs the tax savings offered by filing
Jackie Pearlman, a tax research analyst with The Tax Institute at H&R Block (HRB),
says such a scenario has become more common in recent years with more
people out of work.