According to the tax laws, whether a person can tick either of the 'married filing separately' or 'married filing jointly' options depends on his or her marital status on the last day of the year. If the person is married on the last day of the year, even then he or she can file income taxes under one of the options given here.
Conversely, you are disqualified from using either of the two options if you're unmarried on the last day of the year, irrespective of when you got divorced or your spouse died. So if you expect yourself to be married by the last day of the year, the two options mentioned here need to be examined properly for you to make a correct choice.
Separate Filing Vs. Joint Filing
No doubt married filing jointly has its share of advantages. When there is a considerable gap in the individual earnings, this option seems like a happy tax waiver for the partner earning more, as the tax liability reduces for that person. But there is also the added benefit of tax breaks and tax deductions on show for couples who file their taxes jointly.
What tax benefits do the married people filing separately miss?
- Student loan interest deduction
- Tuition and Fees Deduction
- Tax-free exclusion of US bond interest
- Hope or Lifetime Learning Educational Credits
- Child and Dependent Care Credit
- Credit for the Elderly and Disabled
- Earned Income Credit
- Tax-free exclusion of Social Security Benefits
At the outset, with the higher amount of tax to be paid and of course giving up a few tax deductions may feel like a pinch, but there are other aspects which might help you justify the option of separate filing.
The first case of course is when one spouse owes a lot of money by way of taxes, while the other could get a refund. In this case, the aggregate spend on tax pans out, and since one partner stands in a position of advantage which one wouldn't should the couple file jointly, filing separately makes a lot of sense.
The second case is when you know that your spouse is cheating on his or her taxes. Married filing jointly entails that the tax liability may also fall on the spouse who isn't cheating on the tax. So if your partner is cheating, then you could have to pay the fine from your money. So by opting for separate filing, you can wash your hands off this problem.
Filing Separately - Standard Deductions
The rule states that if your spouse files for standard deductions, then as per the Internal Revenue Service rules, you too have to file for standard deductions and cannot claim itemized deductions.
Filing Separately - Itemized Deductions
Same rule applies for itemized deductions. If one spouse applies for them instead of standard deductions, the other spouse cannot apply for standard deductions either.
While there is no doubt that the option of married filing jointly is clearly the superior one, it may make sense to file separately if there is something suspect about the tax payments of your spouse. Sometimes it is just better to be on the safer side.