Understanding Married Filing Separately

To understand your income tax filing status you need to understand married filing separately (MFS) as a filing option on your income tax forms.

No joint liability. When a spouse signs their own separate return is responsible for the accuracy of their return along with payment of tax if any is due. A separate filing spouse is not responsible for the reporting and accuracy of the other spouse.

Some couples may pay less tax when filing separately. Tax brackets and the standard deduction for MFS is exactly half of those for married filing jointly (MFJ). Spouses who have equal income usually owe the same tax under either status of MFJ or MFS. The only difference in this situation would be if one spouse has medical expenses, casualty losses, or employee business expense that is subject to a percentage limitation based on adjusted gross income (AGI). Basically, anything going on Schedule A Itemized Deductions.

A couple in this situation could pay less tax if they file separately because these expenses are limited by the AGO of one spouse. If one spouse has higher income than the other, the couple could pay less tax filing jointly.

Standard Deduction

The married taxpayer who files a separate return may not be allowed to use the standard deduction if the other spouse itemizes. A taxpayer who qualifies as unmarried under the head of household (OH) status rule can claim the standard deduction even if the other spouse itemizes their deductions.

Lost Credits:

Earned Income Credit

Credit for the elderly or disabled (unless spouses lived apart the whole year)

Child care credit (unless spouses lived apart the last 6 months)

Adoption expense credit (unless spouses lived apart the last 6 months)

Lost Education Credits:

Hope scholarship credit

Lifetime learning credit

Savings bonds interest exclusion

Student loan interest deduction

Other Disadvantages:

Taxable Social Security – 85% of Social Security benefits are taxable (unless spouses lived apart whole year).

Capital Losses – deduction for net capital losses is limited to $1500 per spouse.

Sale of Home – exclusion gain is limited $250,000 per spouse