Married Filing Separately: How Can It Help You Save Money?

Author: Miod & Company
Date: May 19, 2022
Category: Tax
Average Time Reading: 3 minutes

Ever heard of the Married Filing Separately filing status? Most experts agree that it is important to file taxes jointly, but in some cases, it can be beneficial to file separately. 

This article takes a look at who these situations affect and what you should know before deciding if the Married Filing Separately filing status is right for you.

Married Filing Separately

Filing separately from your spouse is one way to divide your tax liability

But that’s not the only reason why someone would want to file separately. Here are similar reasons, applying to either one or both spouses, where they would consider married filing separately:

  • Having AGI-based deductions
  • Having income-based student loans
  • Living in a community property state
  • Planning a divorce
  • Having similar incomes

AGI, or Adjusted Gross Income, is used by the IRS to calculate the amount of income tax you owe. It also affects your tax deduction eligibility; the lower your AGI, the more you can claim. 

One example of a deduction impacted by AGI is medical expenses: you can deduct those that exceed 10% of your AGI.

Student loans can follow you for years. If you’re still paying them during your marriage, you may want to think about filing separately. Why? Student loans are based on the individual spouse’s income, not both. Filing separately can reduce the number of your future payments.

community property state is a U.S. state that requires the marital property to be equally distributed between spouses. If you or your spouse live in one of those nine states, it may affect how you both report your assets and income (and benefit from it).

Filing separately is also a great option for couples that are planning a divorce. This allows each partner to be in control of their own financial situation and taxes.

Also, when a couple breaks up, they can protect themselves from liability issues that could cause tax problems. Since both spouses must sign the joint tax return, it requires an agreement on both sides. 

But if your spouse owes money, filing a joint return can reduce your refund. 

If you or your spouse have any reason to suspect tax fraud or concealment of assets, they can refuse to sign and file separately. 

Reporting income is an important step in every tax return. If you and your spouse are earning approximately the same amount of income, you may save some money by filing separately. For example, adding your income together could potentially place you in a higher tax bracket. 

On the other hand, if you are earning a lot more or less than your partner, filing separately can benefit both of you. For instance, the lower-earning partner can enjoy a lower tax bracket and even receive some tax credits. 

The Next Step After Knowing Married Filing Separately

Filing separately may be beneficial for one couple, but not for another. It’s important to consider your own circumstances when making a decision about your filing status. 

While your tax liability will go down, you could end up paying slightly more and getting fewer tax breaks. 

Making this decision on your own can be difficult, especially if you or your spouse are making a little more than the other.

To get rid of the stress when deciding your filing status, you can hire an expert willing to help you get on the right path. Taxes need a lot of attention—talking to an accountant or advisor is a great alternative to the guess-and-check method.

Here at Miod and Company, we want to help you make the most of a difficult situation. Contact us today!

Related Blogs
Paul White joins Miod & Company

Paul White joins Miod & Company

Author: Miod & CompanyDate: June 15, 2022Category: TaxAverage Time Reading: 4 minutesIt’s not a common occurrence for a business to bring on a member of a rival firm to its staff. It’s even less likely to bring on a founder of a rival firm. Paul White joining Miod...

Find out How to Safeguard Pensions in Divorce

Find out How to Safeguard Pensions in Divorce

Pensions in divorce can be a complex and stressful issue to navigate during a divorce proceeding. The fate of your retirement savings or pension plan may be one of the many concerns you have during your divorce proceeding. If you've been able to save money through...

Contact Us

Address: 27200 Tourney Rd #290 Valencia, CA 91355
Phone: (818) 898 9911

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!