4 scenarios when filing separately when married makes sense

By Susan Shain
January 21, 2020

While married filing jointly comes with a heap of benefits, there are still some situations when it might behoove you to file separately. Here are four examples. 

If you decide later that you’ve made the wrong decision, you have up to three years from the due date of the original return to switch from two separate returns to a joint return. To go from joint to separate, however, you’ll only have until April 15 of that same year. Either way, consider bookmarking Form 1040X just in case. 

1. You have high medical bills

The IRS only allows you to deduct unreimbursed medical expenses if they exceed 10% of your AGI. When you file separately, your AGI will be lower, meaning you’ll be more likely to hit that threshold. 

Here’s an example: 

  • You earn $30,000 per year, and your spouse earns $100,000. Combined, your income is $130,000. 
  • You had a major illness this year, during which you racked up out-of-pocket medical bills of $10,000. 
  • If you file jointly, that $10,000 won’t exceed 10% of your combined income, so you won’t be able to deduct it from your taxes. But if you file separately, 10% of your income is only $3,000 — meaning you’ll be able to deduct the remaining $7,000 of medical expenses.

In this case, it’d be wise to ask your tax preparer whether filing separately could save you money. 

2. You have income-based student loans

If you’re on an income-driven student loan repayment plan, such as PAYE or IBR, your monthly payments are capped at a certain percentage of your income. 

When you file jointly, your spouse’s income becomes your income — which has the potential to dramatically increase your payments

If you can’t afford a big jump, or if you eventually hope to have your loans forgiven, then you should ask a tax professional about filing separately. Just remember that you won’t get the student loan interest deduction if you go this route — and that forgiven loans can trigger a high tax bill down the road. 

3. You have a business

With the advent of the Tax Cuts and Jobs Act, owners of “pass-through businesses” are now allowed to deduct 20% of their income. 

But those with “specified service businesses” — such as dentists, lawyers, accountants, and consultants — can’t claim the deduction if their income is above $315,000 (MFJ) or $157,500 (MFS). 

Say you’re a real estate broker who earns $150,000 per year. Your spouse is a banker who earns $200,000. If you filed jointly, you wouldn’t be able to claim the 20% pass-through deduction, because your combined income would exceed $315,000. If you filed separately, however, your income would fall below the $157,500 limit and you’d be able to deduct 20%. 

4. It’s complicated

Let’s face it: Not every marriage is a fairy tale. 

If you and your spouse live apart or are planning to get divorced, or if your spouse will likely have their refund garnished by the IRS, filing separately might be worth considering. 

And if you suspect your spouse is committing tax evasion, you should definitely file separately, as filing jointly means you’re equally responsible for the accuracy and completeness of the return. While you may be able to claim “innocent spouse relief” later on, filing separately will free you of liabilities from the beginning. 

Not sure if you should file jointly or separately? Learn more here.

Susan Shain is a freelance personal finance writer. She had personal finance stories published in The New York Times, Lifehacker, and MarketWatch. Susan was previously on staff at The Penny Hoarder and Student Loan Hero, and has written content for a variety of Fortune 100 companies.

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