A whopping 95% of married couples file jointly and for good reason. It is convenient and cheaper than filing separately. However, there are a few exceptions, where filing separately makes sense.
Having an Income-based Student Loan
Income-based student loan payments are the key to AGI or adjusted gross income. In effect, your filing choice can dramatically change the size of your payment. When you file separately, payments are only based on the borrower’s loan, rather than on the couple’s joint income.
When you file separately, payments are only based on the borrower’s loan, rather than on the couple’s joint income.
Having a Lot of Medical Expenses
Generally, medical expenses are deductible if they exceed 10% of AGI. The threshold is lowered to 7.5% for people 65 years or older. So the higher your AGI, the higher the hurdle gets. Filing separately can actually lower this hurdle.
If Your Spouse Already Owes the IRS
If your spouse brought overdue taxes into the relationship, then it is better to file separately. This way, the IRS won’t apply your refund to your spouse’s overdue payments.
If You and Your Spouse Are High Earners
The IRS has limited itemized deductions for joint filers with a combined AGI over $309,900. So if you and your spouse are high earners then, filing jointly may cause you to lose some of the deductions. In this case, filing separately is a very good option, but keep in mind that if one of the spouse is itemizing deductions, then the other one has to do the same.
If You Don’t Live in a Community Property State
Filing separately is not viable in community property states like Nevada, Texas, Washington and New Mexico. In these states, anything that the couple earns belongs equally to both of them. So filing separately actually nullifies the advantages of filing separately.
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