When should a married couple file separately?

[SerranoSin]

My family is located in Santa Clara County, California. We are 100% W2 family, but can open a business.  Our W2 income is over $150K each. One eligible dependent. One mortgage. 

Should we continue to file jointly? Or split one head of housed and the other single filer?

[VolvoGirl]

You should file Joint.   If you file Married filing Separate you will probably end up owing more.  MFS is the worst way to file and has the highest tax rates.  And if you live together you can't file Head of Household and definitely not Single.

Here's some things to consider about filing separately……

In the first place you each have to file a separate return, so that's two returns.  And if you are using the Online version that means using 2 accounts and paying the fees twice.  

Many people think they come out better when filing Married Filing Separate but they are probably doing it wrong.  If one person itemizes deductions on Schedule A then the other one must itemize too, even if it's less than the standard deduction, even if it is ZERO!  And if you are in a Community Property state it can be complicated to figure out.

And there are several credits you can't take when filing separately, like the

EITC Earned Income Tax Credit

Child Care Credit

Educational Deductions and Credits

And contributions to IRA and ROTH IRA are limited when you file MFS.

Also if you file Married Filing Separately up to 85`% of your Social Security becomes taxable right away even with zero other income.

See …….

https://ttlc.intuit.com/community/married/help/is-it-better-for-a-married-couple-to-file-jointly-or-...

[marctu]

@SerranoSin so since you are filing as married filing jointly ("MFJ"), single is not a filing status you can use.  Head of Household is also probably not available either.  Although you can be married and file as head of household you would need to be living apart for the last six months of the year.

So that leaves married filing separately ("MFS").  California is a community property state, which is not an easy task to complete.  If you are so inclined look here: IRS Publication 555

So the only way to determine if MFS is better is to actually do multiple tax returns, which is a large investment of time on your part.   If you have any disparity in income, it is highly unlikely that you would pay less in tax using MFS.  This is due to the fact that when you are filing as MFS you use the Single tax tables, which are half of the MFJ tables.   

Ultimately, if you want to run the numbers you can, but I have rarely seen MFS being better than MFJ.  This does not even account for the fact that a number of credits are not allowed when using MFS.

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

**Say "Thanks" by clicking the thumbs up icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"