Husbands and wives might stick together through thick and thin, but that doesn’t imply they must also combine their tax filings.
Although the majority of married individuals submit a combined tax return and gain advantages from it, an increasing number are opting to file independently instead.
Occasionally, the figures align just right when choosing to file separately," explains Matt Metras, an enrolled agent at MDM Financial Services. "I've personally gone ahead with this approach.
Approximately 7% of married couples choose to submit individual tax returns instead of filing jointly, an increase from 4.7% ten years prior. According to the Internal Revenue Service, you qualify as a married couple for taxation purposes provided your marriage status was intact on December 31st of the relevant tax year.
If you and your spouse choose to file a joint tax return, your incomes are combined and tax benefits and liabilities are shared. When filing separately, each spouse reports their individual incomes on their own separate return.
Typically, filing as a couple results in a reduced tax liability since various deductions and credits are exclusively offered to those who file jointly. These include benefits like the child and dependent care credit, earned-income tax credit, American opportunity tax credit, and lifetime learning credit.
However, these are elements that might tilt the balance towards choosing to file taxes individually:
High medical expenses
When deductible expenses are limited based on income, a couple may be able to maximize the deductions and come out with a lower tax bill by each filing their own return, says Andy Phillips, vice president of the H&R Block Tax Institute.
For example, medical expenses can only be deducted to the extent they exceed 7.5% of your adjusted gross income.
“You may have one spouse with significant medical expenses, but the couple’s joint combined income doesn’t allow them to deduct,” Phillips says.
Submitting individual tax filings might allow for medical expense deductions.
Think about a married couple whose joint adjusted gross income totals $300,000. For them to qualify for any deduction of medical costs relative to their earnings, these expenses must surpass 7.5%, equating to more than $22,500.
Suppose one partner earns an annual salary of $60,000 and has medical costs amounting to $20,000. If they file jointly, none of these medical expenses would qualify as tax deductions.
“By filing separately, that spouse gets a deduction of $15,500 as long as he itemizes deductions,” Phillips says.
State tax considerations
Another tax-driven reason to file separately: “When the state tax scenario and the federal interact in the right way,” Metras says.
When each spouse’s income exceeds the married filing separately top income threshold, there is often little difference in their federal tax result between filing jointly or separately—but there could be a big enough state tax difference to favor filing separately, says Sean McKay, a partner at UHY.
Consider a couple living in Massachusetts, which imposes a higher income-tax rate on incomes over $1 million: 9% versus 5% for lower incomes.
“If one spouse earns $800,000 and the other earns $4 million, that entire $800,000 would be taxed at 5% instead of 9%, and the federal difference between filing jointly or separately would be extremely small,” McKay says. “They may benefit from filing separately.”
Your tax status should match for both federal and state returns. However, this rule did not apply to Massachusetts until they updated their regulations for the 2024 tax year.
Student loans
If one partner is enrolled in an income-driven repayment program for their student loans, filing jointly might lead to higher payments overall, according to Jane Ditelberg, who serves as the director of tax planning at Northern Trust Wealth Management.
Despite one partner not having any student loans at all, the repayment strategies still rely on the combined income documented in your tax filings.
When submitting individual tax filings, the reimbursement computation can rely exclusively on the income of the spouse who is in debt.
Your spouse’s tax history and habits
Also consider if one spouse owes back taxes. On a joint return, the IRS would withhold any refund as an offset.
“If the other spouse doesn’t owe past tax debt and would get a refund, separate returns may be best,” Phillips says.
Another issue worth weighing is liability.
“With a joint return, If my wife is self-employed and isn’t reporting her income, the IRS can come after the both of us,” says Jere Doyle, senior vice president at BNY Mellon. “If you think your spouse isn’t being transparent, you might think about filing separately.”
If you file separately and realize after your tax-filing deadline that you would have been better off filing jointly, you can prepare and submit an amended joint return.
But once your filing deadline has passed, you cannot change a joint return into individual returns," Doyle explains. "After submitting jointly, you become responsible for your spouse’s liabilities and they won’t allow you to modify that decision.
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