How should I file my 2018 taxes?

[Adinrob]

I'm starting to get my 2018 taxes in order, but I don't know which filing status would yield the best return. My husband and I separated in July, and I have sole custody of our 2 kids. I am self-employed and average about 16k a year. My husband did not work at all before we split up. He just started a job last week (11/05/2018), but shouldn't clear more than 3k for the year. He also has 4 student loans in default, and since we're getting closer to the end of the year and he's already on an income-based plan, the loans will likely still be in default come time to file. The questions I have are:

1. Which filing status would give the highest return? Can I file head of household, or do I have to file married filing joint or separate?

2. Can he try to claim our two kids because we all were living in the same house for half the year, even though I had the sole income?

3. If we file joint, am I obligated to give him part of the return, even though he didn't work the vast majority of the year and will have such a small net income?

4. If we file joint, can I submit the injured spouse form when we file so they don't take my part of the return? Also, how do they calculate his part versus my part (i.e. is it split 50/50, is it a percentage based on our individual contributions to the whole;for example, if I use our rounded off incomes from above, his part would be 18.75% and mine would be 81.25%, or do they have a completely different way of dividing it up)?

[MargaretL]

Please read carefully as there is a lot of information…

1.  Your filing status is determined on Dec 31st each year. Since you were legally married, your choices are Married Filing Jointly (MFJ) or Married Filing Separately (MFS), unless you will meet the qualifications of being "considered unmarried" - as the IRS puts it - in which case you could also qualify for the Head of Household (HOH) status. TurboTax will help you determine which status you qualify for, and then you can choose…

In a nutshell… you mention separation as of July, one of the qualifications for HOH is that a spouse did not live in the home during the last 6 months (that includes the entire month of July).  If you don't meet this, your only choices will be MFJ or MFS… in this case MFJ is more beneficial generally. 

2.  Your husband can claim the kids as his dependents if they lived with him for more than half the year and the children did not provide more than half of their support.  You literally must count the days/nights…If the children spend an equal number of nights with either parent; or the parents cannot agree who will claim the child, the tiebreaker rules apply. It means whoever has higher AGI (Adjusted Gross Income) will be able to claim the child. (There is an issue of course if both parents claim the same children and only one parent qualifies... the 2nd income tax return claiming the same children will be rejected, the option at this point would be to file by paper with the detailed explanation and school, medical, house bills records proving you are entitled to claim the children and not the other parent.

3.  If you file a joint return, the refund will be a check with both of your names or will go to an account with both of your names. Joint return means a joint refund. It's up to you both how you agree to split it.

4. Should you choose to file jointly,  I highly recommend filing Injured Spouse, so that the portion of your refund is not going towards your spouse's student loan debt.  When you file MFJ and Injured Spouse you get the benefits of filing jointly (all credits/deductions) but you divide your tax return between your portion and your spouse's portion of the refund. The way the IRS calculates it is - they take your information as if each spouse filed separate returns.  At this point, only your husband's refund (based on his income, deductions) is taken to cover his debt on the student loan. Be aware, however, that filing Injured Spouse will delay your refund for about 14 weeks.