Married Filing Jointly vs Separately

Married taxpayers, who were married on the last day of the tax year, have two filing status options when it’s time to file their annual tax return. The best choice varies depending on each couple’s individual needs. Married filing jointly offers lower tax rates, but filing separately may be more beneficial depending on the couple’s individual situations. So, which filing status is best for you? 

Married filing jointly

The married filing jointly status is for married taxpayers who both agree to file a joint return. This can be used by taxpayers who live together in a common-law marriage, who live apart but are not legally separated as well as taxpayers whose spouse dies during the year and have not remarried. Both taxpayers must sign the tax return, unless one spouse who cannot sign due to death, illness or absence.

In form 1040, couples are to record the incomes, deductions, credits and exemptions in the same tax return. If a refund is owed, couples can choose to receive multiple checks, direct deposits to multiple accounts or combined in one payment. However, both taxpayers are equally responsible for taxes, interest and penalties owed.

Filing jointly offers the lowest tax rate to married individuals. The standard deduction in 2022, the amount that is not subject to taxation, was $25,900 and the capital loss deduction was $3,000.

This filing status might be a good choice when only one spouse has an income or a more significant income. In this case, the total combined tax liability is often lower than the sum of each spouse’s individual tax liabilities if they were to file separately. 

Taxpayers who file jointly can also qualify for certain credits such as earned income credit, child and dependent care credit, American opportunity tax credit, lifetime learning credit and savers tax credit.

Married filing separately

Married taxpayers can also choose to file separately. Each spouse prepares a separate tax return to report their individual income and deductions. They must still include their spouse’s information on their tax return. If filing separately, married taxpayers may face a higher tax rate and pay more tax.

Each taxpayer can only take deductions or credits that they qualify for individually. They do have to agree on whether they are both itemizing deductions or taking the standard deduction. One spouse cannot itemize their deduction while the other spouse takes the standard deduction. 

Tax rates are highest for married taxpayers who file separately. The standard deduction in 2022 was $12,950 and the capital loss deduction was $1,500. Filing separately immediately disqualifies individuals from certain tax deduction credits that they would be able to use if filling jointly.

Taxpayers might choose this filing status so that one spouse is not responsible for the others tax liability. Combining incomes and filing jointly might push one spouse into a higher tax bracket and increase their tax bill. Married filing separately might be a good choice if:

• Both spouses work and the income and itemized deductions are large and very unequal
• One spouse is on a student loan income-driven repayment plan
• One spouse has a large amount of out-of-pocket medical expenses
• You are in the process of getting divorced or separated and want to avoid shared liabilities
• One spouse is receiving social security and filing separate means less social security income is subject to taxation

Whether you decide to file jointly or separately will depend on your individual needs. Speak with your tax specialist today for more assistance on which option is best for you.