If you are married, you can select the married filing separately (MFS) filing status. This election may benefit you if you only want to be responsible for your own tax or if it results in less tax than filing a joint return. If you and your spouse cannot agree to file a joint return, you may have to file a married filing separately return unless you qualify for a head of household status. See form 1040 instructions for additional information.
Generally, you will pay more combined tax on separate returns than you would on a joint return. However, unless you are required to file a separate return, you can choose to figure out your tax liability both ways (on joint and separate returns) to see which way is more beneficial. This way you can make certain that the return you file results in the lowest combined tax. When figuring out the combined tax of husband and wife, you may want to consider state taxes as well as federal taxes.
Special Rules for filing separately: When using the married filing separately designation special rules apply that limit or eliminate tax deductions and credits. Generally, this results in a higher combined tax liability verses filing married filing joint.
1. Your MFS tax rate generally is higher than on a joint return.
2. Your exemption amount for computing the AMT is half that allowed on a joint return.
3. A credit for child and dependent care expenses in most cases is not allowed and the benefit for the exclusion of taxable income from your employer’s dependent care assistance program is limited to $2,500 (instead of $5,000).
4. You cannot take the earned income credit.
5. No exclusion or credit for adoption expenses.
6. You cannot take advantage of the education credit (American Opportunities), deduction for student loan interest or the tuition and fees deduction.
7. You cannot exclude any interest income from US savings bonds you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
- You cannot claim the credit for the elderly or the disabled, and
- You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received.
9. The following credits and deductions are reduced at income levels half those for a joint return:
- Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return
- The Child tax credit,
- The retirement savings contributions credit,
- The deduction for personal exemptions, and
- Itemized deductions.
10. If your spouse itemized their deductions on their return you also have to itemize your deductions. You will not be able to claim the standard deduction unless both parties do, and that amount is equal to ½ of the joint return standard deduction.
How to file: If you file a separate return, you generally report only your own income, exemptions, credits and deductions. You can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent on another person’s return. MFS returns can be filed on either a 1040A or a 1040.You must enter your spouse’s full name in the space provided and you must enter your spouse’s SSN or ITIN in the space provided unless your spouse does not have one and is not required to have a SSN or ITIN. If your spouse does not have and is not required to have a SSN or ITIN enter “NRA” in the space for your spouse’s SSN.