Difference between married filing separately and single

There are a number of reasons why it’s usually better to file as married filing jointly. Still, if you don’t want to file jointly, you might wonder what the disadvantages of married filing separately are. 

First, let’s clear the air a bit. People often ask us about the “penalty” for married filing separately. In reality, there’s no tax penalty for the married filing separately tax status. What people thought of as the marriage tax penalty was just a quirk of the tax brackets before 2018. At that time, many double income married couples would owe more tax when filing jointly than they would have owed if they were still single. That’s because the married filing jointly tax rate brackets were not fully double the single filer brackets. So, if each spouse had about the same income, there was a “marriage tax penalty” in the sense that they had to pay more total taxes. 

The “marriage penalty tax” since 2018

The Tax Cuts and Jobs Act of 2018 largely ended this so-called marriage tax penalty. It did this by making most of the married filing jointly tax brackets exactly twice the size of the single filer tax brackets. In addition, the married filing separately tax brackets were changed to largely mirror single filer tax brackets.

But if you’re filing a past year’s taxes, you might still wonder how to avoid the marriage “penalty” tax. In short, you can’t. The only way to avoid it would be to file as single, but if you’re married, you can’t do that. And while there’s no penalty for the married filing separately tax status, filing separately usually results in even higher taxes than filing jointly. For example, one of the big disadvantages of married filing separately is that there are many credits that neither spouse can claim when filing separately. To keep things simple and be able to claim all possible tax breaks, most couples file jointly.

When it makes sense to be Married Filing Separately, despite disadvantages

Again, there’s no penalty for the married filing separately tax status. And though there are disadvantages to married filing separately, there are a couple of situations where you still might want to do that instead of filing jointly. 

For example, if you’re afraid your spouse is cheating on their return by hiding income or inflating deductions, you might avoid being held responsible for that by filing your own return with the married filing separately status. 

Also, many people think they have to file separately to avoid losing a refund to their spouse’s unpaid debt, like defaulted student loan debt or back taxes. While that does work to avoid the debt responsibility, you’ll still be hit by the disadvantages of the married filing separately tax status. If you’re worried about that debt, there’s a better way to avoid having to pay it. Instead of filing separately, you can protect your refund by filing an injured spouse form along with your joint return.

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Married couples have the choice to file taxes jointly or separately every season. While filing together generally pays off, splitting returns may be better in some scenarios, financial experts say.

Married filing separately involves two individual returns, each reporting their own income, deductions and credits. And the tax code typically penalizes those filing apart.

"The IRS seems to have the viewpoint that if someone is filing separately, they're doing something shady," said certified financial planner John Loyd, owner at The Wealth Planner in Fort Worth, Texas, explaining how it may invite a bit more scrutiny.

Still, the tax benefits may outweigh the downsides for some couples. Here's what to know about filing separately.

Student loan repayment

If you're part of an income-based student loan repayment plan, it may make sense to file taxes separately since earnings typically determine what's due every month.

Filing jointly may trigger higher payments, Loyd said, but you need to weigh the other trade-offs before filing apart to lower your bills.

Medical expense deductions

You may also consider separate filings to reduce adjusted gross income if you have high medical bills, said Marianela Collado, a CFP and CPA at Tobias Financial Advisors in Plantation, Florida.

If you itemize deductions, you may claim a tax break for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income, she said. 

For example, with an adjusted gross income of $100,000, you can write off eligible costs over $7,500. The lower your income, the easier it becomes to cross that threshold.

However, spouses filing separately must either itemize or take the standard deduction, Collado explained. They can't use different strategies.

Financial infidelity  

Another common reason to file taxes separately are cases of financial infidelity.

For example, you may sever returns if you've split from your spouse and can't count on them to file taxes accurately or on time, said Monica Dwyer, a CFP, vice president and wealth advisor at Harvest Financial Advisors in West Chester, Ohio.

"You're putting yourself on the line for that information," she said, explaining how signing a joint return may create liability for mistakes or tax fraud.

And there's no statute of limitations for the IRS to pursue cases of fraud, adding further risk for divorcing spouses.

Trade-offs of filing separately

"If couples are going to file separately, they have to look at what they're giving up," said John Gehri, a CFP and vice president at Harvest Financial Advisors in West Chester, Ohio.

For example, most separate filers can't make Roth individual retirement account contributions since the IRS slashes the modified adjusted gross income limit to $10,000.  

If couples are going to file separately, they have to look at what they're giving up.

John Gehri

Vice president at Harvest Financial Advisors

And the agency blocks or limits other write-offs for separate filers, such as the student loan interest deduction, education tax credits and more, Gehri said.  

Whether you're working with a tax professional or filing yourself, try running the numbers both ways before picking a status, he suggested.

"As a general rule, I really try to avoid filing separately," Loyd from The Wealth Planner added. "You don't want the spotlight shining on your tax return."