Should I Do My Tax Filing Jointly or Separately?
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Filing Taxes Jointly or Separately – Pros and Cons

Of all the questions on your annual tax return, you’d think “filing status” would be the easiest to answer.

Yet one of the most common filing questions our tax planners hear is: “Should my spouse and I do our tax filing jointly or separately?”

Close to 2 million married couples choose to file their taxes separately each year, and they do so for a variety of reasons. For example, the IRS saw a significant uptick in married couples filing separately in the last three years as people sought to qualify for pandemic relief. And that’s the key: You need to be deliberate about the decision or it’s likely to cost you.

Your wealth adviser can help you think through the nuances of this decision. In the meantime, here are some of the pros and cons of filing separately:

Pros

For 2022, the standard deduction for married couples filing jointly is $25,900, while filing separately is $12,950 (for tax year 2023, deductions have been set at $27,700 and $13,850, respectively). If there’s a large discrepancy between the two spouses’ incomes, filing taxes separately can sometimes be advantageous depending on the circumstance.

For instance, it can help to maximize certain itemized deductions: If one spouse has incurred large medical expenses, dividing income into two separate returns could make a difference in terms of deductibles. It could also help a small business owner lower their reportable income for a qualified business income deduction. Or an individual may want to minimize reportable income to lower income-based student loan payments.

A second advantage of filing separately is that it severs joint liability for that tax year. If you are separated, going through a divorce or in a second marriage—or if you just don’t want responsibility for your spouse’s finances—filing separately may make more sense.

Cons

For most married couples, filing separate returns will result in a higher tax liability, and it can also affect your ability to maximize saving for retirement in an IRA. (Married couples filing individually typically can’t contribute directly to a Roth IRA if they have more than $10,000 of income.)

The other big downside is that filing separately blocks access to certain tax breaks—including the child and dependent care tax credit and the ability to deduct interest on student loans. In addition, for those receiving Social Security benefits, a larger percentage of the payments may be taxable.

The bottom line? Most married couples come out ahead when they file jointly. You can switch back and forth each year, but when you file separately, both spouses must use the same election (standard or itemized deduction).

The best choice depends entirely on your financial situation. Don't hesitate to contact us with any questions related to your personal circumstances. We’d be happy to help. 

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Video Transcript

It’s tax season and one of the most common questions our CPAs receive this time of year is, should my spouse and I tax file jointly or separately?

Today, let’s explore the difference between the two tax filings and why one option may be better for you than the other.

Hi, I’m Diana Linn, a Wealth Adviser, with Today’s Adviser Takeaway. Each year, married couples have the option to file their taxes together or separately And while filing jointly tends to be more common, there are several scenarios where filing separately may be more beneficial.

Here are a few pros and cons to filing taxes separately. First, for 2022 the standard deduction for married couples filing jointly is $25,900 and separate filing standard deduction is $12,950. It could be more advantageous for spouses to file separately, if one partner has student loan payments, large medical expenses, or if there is a big discrepancy in income between the two.

For example, if one spouse has incurred large medical expenses that aren’t deductible, except to the extent that they exceed 7.5% of adjusted gross income, dividing the income into two separate returns could result in a bigger deduction when itemizing. The same goes for student loans where the monthly payment is calculated by adjusted gross income or in the instances where business owners may need lower reportable income for qualified business deductions.

Another advantage to filing separately is that it severs joint liability for that tax year. So, if you are separated, going through a divorce in a second marriage, or perhaps you just don’t want to take responsibility for your spouse’s finances, filing separately might make more sense.

Now, of course there are a few caveats, or cons, to filing separate tax returns. And the first thing you need to keep in mind is that while filing separately may save you money at tax time, it could result in a higher tax liability and affect your ability to save a retirement in an IRA. Also married couples who file separately, you don’t get the same tax break such as child independent care tax credit or deducting interest on student loans, and even a larger percentage of your social security benefits may be taxable.

Now, you can switch back and forth year to year between filing separately and jointly. However, when filing separately, both spouses must use the same election, either standard or itemized deduction.

So, if you’re curious if married filing separately might be right for you or you have questions, please give us a call.

And that’s Today’s Adviser Takeaway. Thank you so much for listening.

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Additional tax planning Resources

For informational purposes only; not a recommendation to buy, hold or sell any investment product. Past performance is not an indication of future returns. Speak with a financial advisor before taking specific action. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only and should not be construed as legal or tax advice. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. Always consult a professional regarding your specific situation.