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Check out Expert Advice on Married Couples Filing Separately for Maximum Tax Benefits

Experts explore when married couples should opt for separate tax filing, considering deductions and financial advantages.
Cover Image Source: Tax landscapes for married couples (representative image) | Pexels | Photo by Nataliya Vaitkevich
Cover Image Source: Tax landscapes for married couples (representative image) | Pexels | Photo by Nataliya Vaitkevich

Among several decisions to be made during the tax season as the financial year comes to an end, married couples face the choice to file jointly or as individuals. While joint returns often deliver benefits, tax experts reveal scenarios where choosing the latter proves advantageous.

Tax Documents | Pexels | Photo by Nataliya Vaitkevich
Tax Documents | Pexels | Photo by Nataliya Vaitkevich

In 2021, IRS estimates indicated that approximately 3.9 million taxpayers chose "married filing separately," while over 54 million opted for "married filing jointly." Filing jointly packs all income, credits, and deductions into a single return whereas filing separately involves two distinct returns reflecting individual earnings and tax breaks. According to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, joint filing is usually favorable due to broader tax brackets and a more substantial standard deduction. For the tax year 2023, joint filers entering the 10% bracket need $22,000 in taxable income while couples filing separately only require $11,000. However, Lucas emphasizes that there are scenarios where choosing separate returns becomes financially prudent, as per CNBC.

Consideration of separate returns becomes crucial in the context of income-driven student loan repayment plans. Marianela Collado, a certified financial planner and CEO of Tobias Financial Advisors, underscores the significance of such plans, which take into account earnings from the latest tax return. Opting for joint filing could result in elevated monthly loan payments, particularly impactful for a lower-earning spouse with student debt. Thus, the strategic move of separate filing proves advantageous in navigating the complexities of student loan repayment.

Couple discussing Taxes | Pexels | Photo by Mikhail Nilov
Couple discussing taxes (representative image) | Pexels | Photo by Mikhail Nilov

Another compelling scenario favoring separate filing revolves around the strategic pursuit of maximizing itemized deductions. By choosing separate filing, couples gain the ability to leverage itemized deductions more effectively. Lucas emphasizes the annual decision-making process between the standard deduction and itemized deductions with the standard deduction set at $13,850 for separate filers and $27,700 for joint filers in 2023. This strategic approach allows couples to tailor their filing method to best suit their financial circumstances and goals.

Despite the advantages of separate filing in certain situations, it comes with potential drawbacks. Marianela Collado warns that choosing to file separately may lead to unexpected tax consequences, including limitations on contributions to Roth individual retirement accounts (IRAs). Couples opting for separate filing might also face the loss of valuable tax credits, such as those related to child and dependent care, education, and student loan interest.

Determining the most suitable filing status requires a practical approach. A recommended method involves preparing your tax return using both options and comparing the resulting tax liabilities. Modern tax software can streamline this process, automatically calculating the outcomes and offering suggestions based on your financial information. However, these are broad considerations, and the rules associated with married couples filing separately can significantly impact your decision. Consulting a tax professional is crucial to ensure a comprehensive understanding of your unique situation and helps you make an informed choice regarding your tax filing status.