Married Filing Jointly or Married Filing Separately?

Question: I’m married and I’m not sure which filing status I should choose for my personal tax return: ‘Married Filing Jointly’ (MFJ) or ‘Married Filing Separately’ (MFS)? What is the best choice?

Like most things in life, it depends on your situation.  As a married couple, yes, you are allowed a choice of filing your personal tax return under the status of  ‘Married Filing Jointly’ (MFJ) or  ‘Married Filing Separate’ (MFS).  

MFJ is usually the better choice although here are some situations where MFS might be right for you:

1. You report itemized deductions that are subject to Adjusted Gross Income (AGI) thresholds.
   1. Medical expenses: It might be better to file MFS if the spouse with high medical expenses also has a low income. The medical deduction is only allowable to the extent that your medical expenses are greater than 7.5% of your AGI. Therefore a lower AGI on an MFS return will offer a greater deduction than an MFJ return with a higher AGI.
   2. Casualty and theft losses: Casualty and theft losses are only deductible when they exceed 10% of your AGI.
   3. Miscellaneous itemized deductions: Misc. itemized deductions are deductible only to the extent they exceed 2% of your AGI. Example: Unreimbursed employee business expenses, tax preparation fees, investment expenses must all exceed 2% of your AGI to be deductible.
2. One of the spouses has a poor credit history: If one spouse has poor credit and the other one has excellent credit then it may be best to file MFS so the spouse with excellent credit is not subject to credit damage as you may need a strategic ‘partner’ in the marriage to qualify for certain types of loans in the future i.e. mortgage, student loans, etc.
3.  One of the spouse has a blind spot or ‘innovative’ approach to taxes: You love your spouse, but you aren’t able to control them. They are aggressive with the tax code and you’d prefer not to file jointly.  If this is an issue for you consider filing MFS.  Filing a MFJ return makes you and your spouse ‘jointly & severally liable’ (i.e. you get treated as one entity) for any tax obligations. Filing an MFS return will limit your exposure to only include your own tax liability and it protects you from any liability on your spouse’s tax bill.  This is obviously less than ideal and could possibly surface during divorce transition periods.
4. One spouse receives alimony from the other: One of the requirements for receiving alimony is that the spouses may not file a joint tax return. Here MFS is imperative. Keep in mind that alimony paid is deductible to the contributing spouse and is treated as income to the receiving spouse.

Other info about MFS that is good to know:

1. Personal Exemption: When taxpayers file MFS returns each spouse is entitled to claim only his or her own personal exemption (currently $3,800). However, one spouse can claim the others’ personal exemption on their return if:
   1. The other spouse has no gross income.
   2. The other spouse is not claimed as a dependent on another taxpayers return.
2. Separate returns need co-ordination: Filing a separate return needs cooperation between spouses. Both need to itemize or both need to claim standard deduction. The spouse with a standard deduction that is higher than if they itemized their deductions will be at a loss (and vice versa).
3. If you change your mind: If you chose MFS filing status and change your mind you can amend to MFJ within three years of the original due date of the return. Changing the opposite direction (from MFJ to MFS), however, can only be done:
   1. Until the April 15th of the current year.
   2. If neither spouse has received a notice of deficiency.
   3. If neither spouse has sued in any court for recovery of any tax for the year.

Conclusion:
The best way to find out what is most beneficial for your particular situation is to prepare the return both ways and compare the results. If you’re not sure which way to go, ask your tax preparer to run a MFJ vs. MFS comparison analysis.

Disclaimer: This article provides general tax information, not legal advice. Individuals should seek specific advice from their tax advisor before acting on any information provided herein.