I am a U.S. citizen married to a permanent resident card holder. My question is, can we file married but filing separate in order to avoid going in a higher tax bracket?

[swizzy412]

Also I'm concerned if we go this route will it mess up her U.S. citizenship interview? We've filed married for the past (3) years as required by the USCIS, but I just want to know if married but filing separate will mess her process up?

[DS30]

Yes but if the USCIS requires that you file jointly, then you should continue to do so. (For more information from the USCIS, please click here )

You can file as married filing separately but this option has more limitation than married filing jointly. In most instances, filing married filing separately will cause you to pay MORE in taxes (due to having more income taxed at a higher marginal rate) then filing as married filing jointly.

You will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules (see below). However, unless you are required to file jointly, you should figure your tax both ways (on a joint return and on separate returns). This way you can make sure you are using the filing status that results in the lowest combined tax. When figuring the combined tax of a married couple, you may want to consider state taxes as well as federal taxes.

Special Rules

If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you usually pay more tax on a separate return than if you use another filing status you qualify for.

1. Your tax rate generally is higher than on a joint return.
2. Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return.
3. You can't take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 on a joint return). However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. See What’s Your Filing Status? in Pub. 503, Child and Dependent Care Expenses, for more information.
4. You can't take the earned income credit.
5. You can't take the exclusion or credit for adoption expenses in most cases.
6. You can't take the education credits (the American opportunity credit and lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
7. You can't exclude any interest income from qualified U.S. savings bonds you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
1. You can't claim the credit for the elderly or the disabled, and
2. You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received.
9. The following credits and deductions are reduced at income levels half those for a joint return:
1. The child tax credit,
2. The retirement savings contributions credit,
3. The deduction for personal exemptions, and
4. Itemized deductions.
10. Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
11. If your spouse itemizes deductions, you can't claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.