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When Does Married Filing Separately Make Sense?

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Married Filing SeparatelyAfter the wedding, I started taking a closer look at the tax numbers and incorrectly concluded that the only time someone would ever file as “married filing separately” would be if one partner earned a whole lot and one partner earned not as much. The logic was that the lower earner wouldn’t be subject to the same tax rates as the higher earner and thus the difference would overcome the different tax brackets. The only correct assumption I made was that the lower earner wouldn’t lose access to any tax advantaged accounts, like Roth IRAs, because they’d still be over the limits for those types of accounts. I already gave out my hypothesis and my result (I was wrong and am now clueless as to why anyone would file separately if both options were available) but here’s what I did.

Hypothesis: Married Filing Separately shares more of the lower tax brackets as Single filers but you lose practically all of the favorable tax benefits that Single filers enjoy. The benefit of filing separately is if you have a significant disparity in income with the sum total above many of the tax beneficial limits. (this hypothesis is proven wrong)

2008 Tax Brackets

The analysis was using 2008 brackets but you can see the current tax brackets here.

Tax Rate Single Married Filing Jointly Married Filing Separately
10% Not over $8,025 Not over $16,050 Not over $8,025
15% $8,025 – $32,550 $16,050 – $65,100 $8,025 – $32,550
25% $32,550 – $78,850 $65,100 – $131,450 $32,550 – $65,725
28% $78,850 – $164,550 $131,450 – $200,300 $65,725 – $100,150
33% $164,550 – $357,700 $200,300 – $357,700 $100,150 – $178,850
35% Over $357,700 Over $357,700 Over $178,850

Three Scenarios

What happens with a couple earning $100,000 with one earner taking in $80,000 and one earner taking in $20,000?

  • Married Filing Jointly: $17,687.50
  • Married Filing Separately: $16,772 + $2,197.5 = $18,969.50 (correction)

That’s a difference of $2,802.50 but both individuals lose access to a Roth IRA (among other significant benefits).

What about a couple earning $200,000 with one earner banking $120,000 and one banking $80,000 would pay (this doesn’t take into account deductions):

  • Married Filing Jointly: $44,744
  • Married Filing Separately: $28,964.50 + $16,772 = $45,736.50

What!? It’s more to file separately… maybe the disparity has to be greater. What if a couple earned $400,000 with one earner banking $320,000 and one banking $80,000?

  • Married Filing Jointly: $58,787
  • Married Filing Separately: $49,402.5 + $16,772 = $66,174.5

Two Potential Reasons to File Separately

So, I tried to do more research and discovered this great About.com article and according to William Perez, filing separately makes sense in two basic scenarios:

  1. “Filing separate returns makes the most sense when one spouse owes a significant amount of money, but the other spouse could get a refund.”
  2. “It also makes sense when one spouse is cheating on their taxes, and the other spouse doesn’t want to be involved.” (Nice!)

Let’s ignore scenario #2 because anyone who lets someone else knowingly cheat on taxes doesn’t really need to worry about their tax bill, they have bigger issues. With scenario 1, you have to be in such a small window, for both earners, such that the lower earner’s deductions will save them more than the higher earner loses by filing separately (as evidenced by our 80/20 example above). The 25% tax bracket starts at $32,550 for married filing separately but starts at $65,100 for married filing together! I suppose the numbers have to be in that range for this to make sense… but then you start giving up great benefits such as a Roth IRA, which is available if your total AGI is less than $156,000 when you file jointly but only $10,000 when you file separately! (plus, I don’t know if I’d classify someone earning $80,000 as someone who would owe a “significant amount of money,” hence my 120/80 and 320/80 examples)

Plus, if you read the article some more, there are so many headaches involved in filing separately (both have to take itemized or both take standard, state taxes are a pain in many states, etc.) that I can’t even imagine the strangely specific scenario in which filing separately truly makes both financial and psychological sense.

Why would you file separately if you could file jointly?

Hat tip to Ryan Waggoner for providing this Quicken post with some solid reasons for married filing jointly, the main financial reason happens to be in the blind spot of my analysis, itemized deductions.

(Photo: Sean Molin Photography)

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312 Responses to “When Does Married Filing Separately Make Sense?”

  1. melanie says:

    Can my husband and I file jointly on our federal return and single on state returns. We started the year out in two different states. We had both lost our jobs and my husband moved to Virginia for a job. I stayed with the kids to sell the house and I collected unemployment from Michigan. I had Michigan take out both federal and state taxes from the unemployment. I moved with the kids to Virginia and notified Michigan. I still collect my benefits (which are technically from the federal gov’t) from Michigan and I believe they are still taking out state taxes (the unemployment amount hasn’t changed.) We filed an extention. I don’t understand my legal obligations. I just know I lived in both states, collected money from one and I don’t want to be double taxed by both states. If I didn’t earn money in Virginia, I would think I don’t owe them state money. Help, I’m confused.

  2. Rachel says:

    Scenario:

    Newly married a few weeks ago and now trying to figure out how to adjust our W-4′s so we do not owe money on our 2011 taxes and ensure a refund, and also how we should file at the end of the year (MFS or MFJ)?

    My AGI for 2011 will be $36K, husbands will be about $62K, so combined we will gross roughly $98K-$100K.

    I have been told by some to file MFJ, but it seems if we do that we might owe if we don’t withhold extra on our W4, while others have told me we should file MFS. Please help!!

  3. Daryl says:

    i am married but in the process of a divorce. I bought my wife out of the house and we now share nothing finanically together. I was going to file for divorce in June but she wants me to wait till Jan. Am i hurting myself by doing this or is there a benifit to staying married and filing seperate vs getting a divorce and filing seperate.

  4. Jon says:

    Could there perhaps be a fairly large hole in this analysis, one concerning non-American, non-resident spouses (esp. of an American living overseas)?

    To file MFJ, the spouse must place themselves on the IRS radar (forevermore) by obtaining a TIN, even if they never intend to move to the U.S. They could place themselves into the unfortunate position of becoming liable for U.S. taxes every year on their foreign income for the rest of their lives (when the alternative is “not”). Apart from the moral issue of expecting a citizen of another country to do this (e.g. they may simply refuse), this is quite a heavy burden to place on someone who is only interested in “an American” (as a spouse), and not in “America” the country.

  5. Anonymous says:

    You left out a third scenario. When one spouse is a student and the other spouse does not wish to shoulder the burden of paying for their education. Filing separately allows the student spouse to receive grants/scholarships/student loans to pay for their education without placing the non-student spouse under a financial obligation.

    • Stephanie says:

      This will be the scenario for myself and my fiancee next year, which is why I was researching it. He makes significantly more money than me which would remove my possibility for the pell grants that I qualify for without his income, so I was entertaining the idea of MFS.

  6. Eric says:

    One reason that was also not mentioned and that most people aren’t aware of is if one spouse has a significant amount of student loan debt and qualifies for Income Based Repayment (IBR) and the other spouse makes a significant amount of money.

    In my case my soon to be wife will be graduating with over 200,000 in student loans. With IBR she will only have to pay ~160 per month. If we file jointly the payment will be 1,500 a month since my income will be taken into consideration! IBR does not require my income to be taken into consideration if we file separatly, which is very nice and easily offsets the tax penalty I’ll be paying

    • asdf says:

      You would be paying that torwards the loans and interest on the loans instead of just giving to the government.

      • Jen says:

        If the wife works in public service, whatever remains of her federal student loans is forgiven after 10 years of payments, and even if she doesn’t work in public service, after 20 years of repayment, the rest of the loans are forgiven. the only thing about the 20 year payment, is than the forgiven debt is taxable.

        • Jenifer says:

          I need to know more about what you decided to do “asdf”. I am a teacher and make about 38,000 a year AGI and my husband is an artist making about the same AGI a year. (we have 2 kids) I have $105,000 in school loans and I am on the IBR to work towards the Public Service Loan Forgiveness in 7.5 more years. I have only been paying $281 a month on my Federal Loans and now with our AGI increasing I am looking at $650 month. Would the MFS be a better fit for us so my loan payments would stay the same? I need help because we finally are starting to get ahead in life and now all the “extra” money we had will go to more debit. I was messing with numbers and it looked like I would only be paying the Federal Government about $400 extra a year in taxes and about $3600 extra a year in loans….am I seeing this correctly or what loop hole am I missing?

    • Charles says:

      Congratulations Eric. Now your family is paying more in taxes by filing separately, AND you’re paying more in student loan interest by accepting the lower IBR payment. Unless you never plan to pay back the loan ( ie you expect your wife to die broke, or join a loan forgiveness program), I’m not sure how this plan benefits you financially.

      • Cody says:

        I can’t speak to Eric’s example specifically, but if you qualify for public service loan forgiveness by being in public service and your spouse makes a lot more than you, than married filing separately makes a lot more sense. Without filing separately, we would pay about $600 per month in student loans. My wife makes a lot more than me, ($50,000 to my $30,000) but if I file separately, then my payment goes from $600 to about $10 per month. A $590 per month savings. After 10 years, whatever I haven’t paid will be forgiven, so its a no brainer. Also, we qualify for a refund on our taxes whether we file jointly or not, so its even more of a no brainer (in my circumstance if no one else’s).

  7. julie says:

    I am in a situation, where I do not know what to do. My husband owes a lot of back child support.(prior to our marriage) I worked all year and finacially supported my five children. I know I can do injured spouse, but I am not sure if I want the IRS to decide what happens to my refund. I will very upset if my refund goes to the other women. I have thought about filing separately, I know I can’t claim earned income, but that way I don’t have to let the IRS decide. Any thoughts???

    • Susan says:

      I have the same issue, new husband owing back support and not wanting my refund touched. Do I file separately?

      • Melissa says:

        I’ve been in your shoes for a few years now. My husband owes back child support. They take our refunds every year. Once you file, you will want to send in an “Injured Spouse Claim Form”. This form will force them to look at your taxes and seperate your refund from your spouses. Your spouse’s refund goes to support and yours goes in your pocket.

  8. Married with Stepchildren says:

    I hear both of you with the husband and child support. I was a single mother for 8 years raising my three children, my ex never paid a dime in child support for 6 of those years. My now husband and I were married almost two years ago, finding out about back child support should have been discussed when you were planning the wedding. My husband went into this marriage knowing I do not receive a dime from my ex and that there is nothing we can do about it thanks to shady doctors who continue to give my ex temporary disability papers for a year at a time which exempts him from paying child support. I am very proud of my husband and the fact that he pays his child support, however if he owed back support then I would want to help him catch that up so that his children were taken care of and that bill would be off our heads. The comment that you don’t want your money going to “the other woman” is such a bad way to think about it, he is paying to support HIS CHILDREN, shouldn’t his children have the same oppertunities that yours do? Shouldn’t they get the same support from him as your children get from him? Fair is fair. I am sorry if you don’t like this post but these are innocent children that are suffering and what is right for your child/ren should be expected to be right for his.

    • JM says:

      Your wrong She doesn’t owe his children anything! It is communistic thinking to say that you need to provide for someone else’s children as much as you do for your own.

    • Monica says:

      Of course I want his children to have the same opportunities! However, more money in that “woman’s” pocket means more shopping for herself while my stepchildren wear the same scraps. I don’t care what anyone says, not all women who receive child support, spend it on the children. My hubby has a trifling ex, whom I can swear up and down that she’s spending his child support on herself.

    • kk says:

      If your X husband is etting dissability, his children are intitled to get it also if under 18.This is not your new husbands responsability to support the x.s children but as a great man he is.Ask questions about this! Yes been there too regarding the tax taking.Thy offering a compamize with child support for arrears before tax time, barrow if you have to, to get it taken care of.Most cs angecys will take a 1/4 as full payment if you can pay it in one payment!Better then paying it all if its high! Good luck

  9. MeMyselfandI says:

    @Married with stepchildren: Wrong wrong wrong.. Why should the ex’s new wife be responsible for “financing” the existing children when the paternal mother gets to claim the children and not have child support shown as income? Child support is over inflated as it is. And even if she were getting child support, the system is designed for the father to pay those taxes on income that is redistributed to the ex both paycheck and at tax-time. They are not her children to support even if her dead-beat husband doesn’t pay for them and she shouldn’t be financially responsible because she is considered “an extra curricular activity” according to any judge. The primary family comes first and above all, you should know that as do I. The part about “your” ex having a disability is considered through the Fed and apparently you have child support building up in a state in which he filed under and just don’t know about it. You cannot file a disability and get a full credit when your in the support system and if so, he wouldn’t be getting as much so that money he isn’t getting is definitely somewhere, building up with interest paid by his benefit deduction. If you disagree than every dead beat dad would be doing this if that were the case!

  10. Marcy says:

    Im going through a divorce. What are the benefits, if any of filing seperate? My(ex)husband and I make almost the same amount of money, but our 3 children reside with me.

  11. Jennier says:

    Lucky for me I’m marrying a guy who does not owe back child support. My question to all of you is, once we’re married can I avoid having my income included in the father’s net worth when child support is calculated. I live in California so I’m sure laws are unique to the state. I’ve heard two conflicting stories. one, we can file our taxes Married but separate and my income will not be included in the father’s net worth. Two, the only way to avoid this is to not get married. Any one know the correct answer. Please help.

    • john b says:

      I do not know the laws in California but I dealt with this same issue I do New Jersey. My ex took me back to court after I remarried because she was told she would receive an increase in child support because of my wifes income. Once I was served with the paper work from the court I did my research and also hired attorney and found she was completely wrong the courts only looked the legal parents income when calculating child support and being I made less and she made more from when the child support order was issued her greed cost her lawyers fees and $45 dollars a week. Also with the women whos husbands are behind on child support I don’t know there specific stories or why they are delinquent but come step up and pay for your kids I am buy no means wealthy and I carry around a 1500 surplus in my child support account

    • Rusty says:

      Look at it this way: Were you there when the child was concieved ? NO !!! Your salary is NOT counted in regards to child support..

  12. Married Filing Separately NY says:

    Despite what the “experts” claim all over the internet, there actually IS a valid, financial benefit to Married Filing Separately in New York State – at least through the 2011 tax year. If a couple makes over $300k combined, they will be subject to the recapture rule, which effectively eliminates the lower rate applied to the amount < $300k. The rate on ALL of the income will be 7.85%. HOWEVER, if the couple each make less than $300k, then the effective rate will be in the 6.5% range, depending on the income. For example, John and Jane Smith have taxable income of $175k each (350k combined). They would pay $27,475 in NYS tax filing jointly. Filing separately, they would pay about $23,800. Depending on circumstances, Federal tax may be adversely affected, but in a relatively simple scenario, the Smith's would realize a net overall benefit of $3400 by filing separately. Mathematically, it's quite simple, for those with combined income over $300, but separately less than $300 each, the net overall benefit is about 1%.

    • Married Filing Separately NY says:

      Update: You CAN file jointly for Federal, and Separately for NYS if you desire. This might make sense since filed combined for Federal is looked upon more favorably for mortgage loans.

  13. Crystal says:

    We are filing married filing separately this year because my husband has $60,000 in student loans and we are going to file for income based repayment. We each made about $25K in 2011 so if we filed jointly our adjusted gross is about $49,000 which means our student loan payments would be adjusted to about $200 (down from the $387 he already pays). But, if we do married filing separately, the refund is obviously going to be less from the IRS but when we do the IBR filing for the student loans, our payment will be $0 based on my husband making less than $35K last year. This nets us an extra $200 per month or $2,400 over the next 12 months. So we might lose some money on the refund now but the IBR of $0 over the next 12 months more than makes up for it in the long run. This is definitely a scenario where married filing separately makes sense. Anyone trying to do IBR should try married filing separately to see if it would benefit them.

    • Julie says:

      Crystal,

      I am in the same situation. I have done our taxes online trying every scenario possible to see what would benefit us. I too owe about 51,000 in student loans and am trying to get my student loan payment reduced using IBR. I believe filing MFS is the best option for us at this time.

  14. Doc says:

    If my wife and I file separately and I do a itemized deduction does she have to do the same or can she do a standard deduction.

    • Married Filing Separately NY says:

      Doc,

      You both have to follow the same convention. Either both take standard, or both itemize.

  15. LISA says:

    my husband and i have been married for 4 years. I would like to file joint but I was told if we file joint tax returns, his ex will be able to go back to court and ask for more money because the income tax will show my income and his combined. so instead of his support being based on $50,000 it would be based on 120,000. is this true? or will the judge keep the income seperate?

    • Sheila says:

      Lisa,
      The courts will go by your husbands pay statements or his total of income provided on his W-2, not (both) your tax totals combined.

  16. Dustbunny says:

    Another scenario for doing Married Filing Seperately is having a large mortgage that is 80%+ interest only (+$10k) and $8k in taxes.

    If you put that against a a Married Filing Jointly ($300k income), we get back only $427. If we do Married filing Seperately, one of us owes $2200, but the other person with the smaller salary gets a return of $12,000. Netting out at +$9800 vs. the +$427.

    If you have that scenario, don’t let the gov get another penny from you!

    • lisa says:

      pretty sure you are doing at least one of these returns incorrectly. You are not going to come out almost $9800 ahead just becasue of mortgage interest. I hope one of you isn’t itemizing (mortgage interest/taxes) while the other takes standard deductions.

  17. Susann says:

    My husband and I were married in October of last year and filed our taxes for the first time. We filed together. He makes way more than I do and I am a student. I have one child from a previous marriage. After filing together the money went into his bank account and he refuses to give me any money, even for past medical bills that I need it for. Before we were married he usually got back around $1000 and I got back $5000. Together we got back $6500. Would it be crazy to file seperate next time so I can get my share?

    • SoundAdvice says:

      Susan, if my wife pulled something like that with me and refused me access to my hard earned money, I would get a divorce. I would be less concerned about filing separately and more concerned about why your “husband” is STEALING from you, seriously, if your husband is taking your money without your permission then you are in an abusive relationship and it won’t be the last time he takes money from you. Find out from a tax pro what you should have gotten back from the fed based on your person income and deductions, if it matches up with the 5k you think you should have gotten and your husband refuses to give it to you, leave him, there is nothing worse than a partner stealing from you. UNLESS of course he gave you an equivalent amount of money for other things, then he might be justified in taking the money, but I don’t know the full story.

      • Sean Reed says:

        Sound, you may not have all the information here. It seems like the husband is probably providing a much better lifestyle for Susan and her child from another relationship than she would have by herself. I know I lived in totall poverty when I was in school.

        That may be why he is keeping the money….he is paying 95% of the bills.

    • lisa says:

      as a student with a child, you would likely get tax credits such as earned income when you filed on your own. When you are married and if your husband makes a lot more money than you, you will no longer qualify for that tax credit and the IRS does not allow that credit if you file separate. Likely your husband’s income tax has gone down as he has gotten the benefit of lower tax brackets as a result of being married and having a dependent. If you filed separately, I wouldn’t be at all suprised if you didn’t get a refund and the entire refund was shown as your husbands. Don’t get me wrong, I think the money is joint in a marriage, but I doubt your share of the refund would still be $5000 even if you filed separate.

  18. Dragonfly says:

    My husband owes a lot of back child support and the last couple of years our entire return has been intercepted. This past year I had my own income and thought about filing married filing separately but was told that we had to continue filing jointly as we have been doing…..I now have to file additional forms and wait another 2 months or so to get my part of the refund….if only I had known that I could file separately I wouldn’t have this problem….

  19. emme says:

    Trying to decide on how we should file. According to a family friend that is putting our returns together; she advised that we file MFS. Filing MFS will result in a return to both of us. If we were to file MFJ we would owe just over 2k. His taxable income is 275k and mine is 70k. I would have guessed that filing together would have benefited us more. However, we don’t have any children and no property. Does it make sense that we will be getting a return if we file MFS?

  20. Sean Reed says:

    My wife declared 3 exemptions, so she underpaid her taxes (she makes about $73K a year). She declared herself, our son…and get this, an unborn child we lost through a miscarriage.

    Also, she has not provided me with her W2. I told her to go to her employer and get it, but she claims it is company policy to only mail it. I doubt that, since employers are legally required to provide it by Feb. 2. It is March 16th.

    We have a pretty extensive return (one child, I own a rental property) so it takes a full day for me to do it (not factoring in glitches like a bad Turbo Tax disk). I teach college and will not have time to work on it as I do now (spring break).

    I have run the numbers, and if I file Married separate, I will get over 6K back. My wife will owe quite a bit of money (nearly $4K) since she underpaid. If I file jointly, which I can’t w/ out her w2, I will only get $3K but she will once again (I have bailed her out financially many times) get off w/ no consequences.

    Overall we will get less if I file jointly, but should I file separately and finally let my wife take some consequences for her actions?

    I know this may be more than just tax advice, and my wife is sweet otherwise, but I am very tired of her irresponsibility.

  21. mxfrank says:

    A relative of mine wants to disperse a large sum of money to individuals in her family and avoid the tax man by limiting the gifts to $13,000 each. Will a husband and wife be required to file separate tax returns if they both receive a $13,000 gift in order to avoid paying income tax on $26,000?

  22. Pamala says:

    Is it smart for my husband and I to file married filing seperate?
    He owns his own business and has to pay in every year, I on the other hand have a really good job and pay in lots of taxes that I should get back. I’m afraid if I file with him I won’t get a penny back??

  23. Jocelyn says:

    My husband makes roughly $27k a year. I don’t have a job but I received around $6k in FAFSA money not applied towards tuition since I am a Veteran and the VA pays for all my tuition, and my schools matching grant to make up for what the VA does not pay. Post 9/11 GI bill is non-taxable but FAFSA money not applied towards tuition is counted as income. Maybe we are doing it wrong but filing jointly it came back as $6k less refund adding FAFSA money.

  24. JRJ says:

    I’m doing my granddaughter’s taxes – she was married Jan. 2012 – her income for the year is about 5200.00 – her husband’s is about 9,000.00 Social Security Disability – he has one dau – together they have one son. I understand he owes back child support (on other children). They had been told she should file an Injured Spouse form – Now in doing their taxes together – refund is about 2400.00 – I really don’t want her to loose this refund – she really needs it. What is the best way for them to file? Thanks.

  25. Anita Moles says:

    What if a couple marries and the husband owes back childsupport. Would it make sense to file separatly?


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