Filing Married Filing Seperately

[Droth53]

My wife and I have always filed a joint return.  We are now retired and my current monthly Parent Plus loan payment is over $400 and the total outstanding balance is over $60K.  We are attempting to reduce the monthly payment and thought it might make sense to file separately.  In 2023 our combined taxable income was $82K with a tax of $9.4K.  If we filed separately my taxable income would be approx. $22K and my wife's would be aprox. $60K. Can you let me know if our combined tax due would be higher filing separately.  Thank you for any assistance you may provide.

[xmasbaby0]

No---we are not going to do all of your calculations for you.   But, you can try that for yourself.  It is easier to use the desktop software, but it can be done using online too.  The 2024 software becomes available in late November/early December.

It is not easy to compare MFJ to MFS using online TT but you can do it.  Since you only get one return for each account and user ID, you have to use 3 accounts and user ID’s—one for MFJ and two for each of the MFS returns.  Compare, choose, and file—and pay—accordingly.

It is much easier to do this comparison using the desktop version of TT installed from a CD or downloaded to your own computer.  You pay once for the software and you can prepare multiple returns easily, and it has a “what if” feature that allows comparisons.

WHAT IF…?

If you are using Desktop software:

https://ttlc.intuit.com/questions/2895312-how-can-we-compare-married-filing-jointly-with-married-fil...

If you were legally married at the end of 2024 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $29,200 (+$1500 for each spouse 65 or older)  for 2024. You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit. 

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return.

 Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

 If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice since with online, you get one return per fee.

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[marctu]

So you hit one of the only areas where Married Filing Separately ("MFS"), in my opinion, may actually be better.  For visibility this is an article that I have shared:  4 Things to Know About Marriage and Student Loan Debt 

So, when you file MFS, the standard deduction of $29,200 is split in half.   So with $22K of income, your taxable income would be approximately $7,400, which would all be in the 10% tax bracket.  Your wife's taxable income would be approximately $45,400.  The 12% tax bracket goes up to $47,150 in 2024, so the tax on her income is approximately $5,216.   That is a total tax of $5.956 ($740+$5,216).

When filing as MFJ the tax is $5,872 using the same numbers that you provided; therefore, you would pay more in taxes, $84 more.

You would then have to weigh how much the payment goes down, which would not have to be a lot to make up the $84.  

Keep in mind that the numbers above are based upon Married Filing Separately in a non-Community property state.   The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Thank you for your question @Droth53 

All the best,

Marc T.

TurboTax Live Tax Expert

27 Years of Experience Helping Clients

[Mike9241]

@marctu the incomes they cite $60K & $22K they say are taxable incomes. so if correct they've already accounted for the standard or itemized deductions. this seems likely since they say their joint taxable income for 2023 was $82K.