Many people expect tax breaks when they get married—in fact, the tax breaks associated with marriage are often considered to be one practical reason to get married. But being married and filing together isn't always the best choice. Sometimes filing taxes separately could make more sense.
One Spouse Has Significantly More Deductions
When filing jointly, a married couple has to meet a specific threshold for deductions. In particular, medical costs need to be over 10% of an individual's adjusted gross income to be deductible. If one spouse has had significant medical costs throughout the year, it may be that they meet this 10% threshold on their own, but they won't if they file with their spouse. While there are other deductions that do operate similarly, medical expenses are the most common. This is especially true if the spouse with the medical expenses has a lower income.
Spouses Are in Separate Tax Brackets
When a couple exceeds a certain tax bracket, their income after that bracket is taxed at a higher rate. In general, tax brackets for couples are adjusted to be higher than tax brackets for individuals—but there can be situations in which each of these individuals want to be taxed at a lower rate. Couples that have very similar incomes are more likely to desire this than those with significantly disparate incomes.
Spouses May Not Have All Their Information
If one spouse has all of their tax information and the other does not, it may be ultimately beneficial for one spouse to file their taxes (and thus receive their refund) and the other spouse to file for an extension.
Spouses May Be Separating Their Finances
Finally, there is another reason why spouses may want to file separately: if they will be separating their finances. This can occur due to issues such as a divorce or a separation that is on the horizon, but it can also be because one spouse is significantly in debt or because one spouse is declaring bankruptcy. When filing separately, one spouse will usually not become responsible for the tax debt of the other—even if they do continue to be married.
Filing jointly is generally not difficult; it simply means that each individual will file as though they are single, even though they will mark themselves down as married. A tax accountant such as Hoff John CPA PC can help a couple determine whether they should be filing jointly or separately.