Should You File Your Taxes Jointly?
November 16, 2016Post updated 1/17/2018
I remember the first year after my brother got married, when he called to ask me a tax question and shared that he and his new wife had decided to file “single” status because that way they both got refunds. I felt like a real jerk crushing their refund joy when I told them that they don’t actually get to choose. Once you’re married, your choices are narrowed to “married filing jointly” or “married filing separately” (or MFJ versus MFS).
Generally speaking, the government wants married people to file joint returns, so they make it pretty unattractive to file separately (although that’s gotten better with the new tax rules), even though the “marriage penalty” is real when it comes to tax brackets and other limitations. For most married couples, it makes the most sense to file jointly. But there are some instances when it might make sense to file separately: (You can switch from year to year.)
One spouse has high medical expenses but a low income: This would make it easier for the doctor bills to exceed the 7.5% threshold necessary to deduct medical costs.
One spouse explores more creative methods of tax avoidance: When you sign a joint return, you’re accepting legal responsibility for everything on the return. If you know your spouse takes liberties with tax deductions, you may want to file separately to protect yourself if the IRS comes calling. There is such a thing as innocent spouse relief, but you have to prove you actually didn’t know of the questionable practices to qualify.
You’re heading for single status anyway: Your filing status is determined based on your marriage status on December 31st. If you’re in the process of getting divorced, but it isn’t final by the end of the year, you may choose to file separately to avoid being tied together by tax issues after the marriage is over. When I got divorced many years ago, we filed in December, but the divorce wasn’t final until January. We filed a joint return that last year and agreed to split the refund, but that only worked because we still had a modicum of trust with each other on financial issues.
However, most couples choose to file jointly as there are many drawback to filing separately:
Tax brackets may be less favorable. MFS marginal brackets have taxpayers jumping up to higher brackets at lower incomes than MFJ taxpayers.
You may have lower deductions and credits. If one spouse itemizes, both have to even if one spouse would receive a higher deduction using the standard amount. Spouses split joint deductions like mortgage interest for a mortgage in both names, but charitable deductions and other itemized deductions go on the return of the spouse that paid them, which could leave a spouse with very few itemized deductions claiming less than they’d get as a single taxpayer.
If you file MFS, you also cannot claim many credits and deductions such as the earned income credit, adoption expenses, child and dependent care and education credits, and the student loan interest deduction. In addition, the child tax credit is reduced and you can only deduct $1,500 of capital losses per year versus $3,000 for MFJ.
For most people, filing jointly will make the most sense. The best way to decide would be to figure out your taxes both ways. Many tax software programs do this analysis for you. Then file according to the method that leads to the lowest overall tax bill for your family.