Married Filing Jointly vs Separately: Which to Choose?

Summary: Deciding between married filing jointly and married filing separately, the two common tax filing options for married couples, can be tricky. This article breaks down the key differences, financial implications, and real-life scenarios to help you make the best filing decision for your unique situation.

What is “married filing jointly”?

“Married filing jointly” is a tax filing option available to legally married couples. It allows both spouses to combine their incomes, deductions, and credits on a single tax return. For many couples, this filing status can make a difference, offering perks like a higher standard deduction and access to valuable tax credits.

One of the biggest draws of filing jointly is a lower tax rate. By combining your income with your spouse’s, you may find yourselves in a more favorable tax bracket, which can translate to paying less in taxes overall.

That said, filing jointly isn’t just about crunching numbers. It also requires trust, as both spouses share responsibility for the information on the return. But, for many couples, the potential tax savings make it worth considering. If you’re looking to maximize your benefits as a couple, this filing status might be your best bet.

What is “married filing separately”?

For couples who want to file their taxes individually instead of combining everything on one return, filing separately may be the better option. While it’s not the most common choice, it can be helpful in certain situations.

Filing separately might make it easier to qualify for a deduction. It can also be a way to protect your refund if your spouse has debts that could otherwise put your money at risk.

However, this filing status comes with trade-offs. You may lose access to certain tax credits, like the earned income tax credit, and face a higher tax rate than the married-filing-jointly tax brackets offer.⁽¹⁾

When deciding whether to file separately, it’s worth considering if financial independence or unique deductions are a priority.

Comparing the financial impact

Choosing between filing jointly or separately can have a significant impact on your tax bill, so you must make an informed decision. Here’s a closer look at how they differ:

Tax rates and brackets

Filing jointly typically puts you in a more favorable tax bracket. The married filing jointly tax bracket offers higher income thresholds, which often means a lower tax rate on your combined income. This is particularly beneficial if one spouse makes significantly more than the other. On the flip side, filing separately usually means you’re taxed at higher rates, which can increase your tax bill.

Access to tax credits

One of the biggest advantages of filing jointly is gaining access to valuable tax credits like the earned income tax credit and the child tax credit. ⁽²⁾ These credits can reduce the amount of taxes you owe or increase your refund. If you file separately, you’ll most likely be disqualified from these credits, which could cost you money in the long run.

Maximizing deductions

If one spouse has significant itemized deductions—like high medical expenses or large charitable contributions—filing separately might help maximize those deductions. Certain deductions, like medical expenses, are based on a percentage of your income, and filing separately could result in a larger deduction if one spouse has a lower income.

Protecting your refund

Filing separately can help protect your refund if your spouse has financial issues, such as unpaid taxes, student loans in default, or other debts. In this case, choosing to file separately ensures that your refund won’t be used to cover their liabilities. This can provide peace of mind if you want to keep your finances separate for any reason.

Common scenarios for choosing each filing status

Choosing the right filing status depends on your unique circumstances. Here’s a breakdown of when married filing jointly or married filing separately might make the most sense:

When married filing jointly might work better

• One spouse earns significantly more: Filing jointly often results in a lower tax bill because of the more favorable married-filing-jointly tax brackets.
• Access to tax credits: Joint filers can claim valuable credits like the child tax credit or the earned income tax credit, which aren’t available to separate filers.
• Straightforward finances: Combining income, deductions, and credits into one return is usually simpler and can lead to better savings.
• Easier filing process: Preparing a single return is typically less complicated and often more cost-effective than filing two.

When married filing separately might work better

• High medical expenses: Large medical bills can qualify for deductions more easily when calculated based on a lower income.
• Protecting your refund: Separate filing helps ensure your refund isn’t used to cover your spouse’s debts, such as unpaid taxes or defaulted loans.
• Preference for financial separation: Couples who maintain separate financial lives may find this option better aligns with their approach.
• Complicated tax situations: A spouse dealing with tax issues or uncertainty can file separately to avoid impacting the other’s return.

The right choice depends on your financial priorities, whether it’s maximizing savings, simplifying the process, or helping to protect your assets. Consulting a tax professional or using tax software to compare scenarios can help you confidently decide.

How to make the best decision

• Run the numbers: Calculate your tax liability for both filing statuses using tax software or professional help. Compare deductions, credits, and tax rates.
• Prioritize your goals: Decide if you want to maximize credits, simplify filing, or manage separate financial responsibilities.
• Check deductions: Filing separately may make it easier to qualify for deductions tied to income.
• Assess liabilities: Help protect one spouse’s refund by filing separately if the other has debts or tax issues.
• Get expert advice: Consult a tax professional for personalized insights based on your unique situation.

Making the right choice for your financial future

Choosing the right filing status—married filing jointly or married filing separately—can significantly impact your financial situation. By understanding the differences and considering your unique circumstances, you can make an informed decision. At Mutual of Omaha, we offer resources to support your financial journey, helping you navigate important decisions and plan for a more secure future.

Looking for help navigating your financial future? Consult with a financial professional today!

FAQs

Q1. Are there penalties for married filing separately?

While there aren’t direct penalties, filing separately can restrict your ability to claim valuable tax benefits, such as the child tax credit or certain education-related deductions.⁽³⁾

Q2. Can we switch our filing status later?

If you initially file separately, you can amend your return to file jointly within three years of the original filing date. However, once you file jointly, you cannot switch to filing separately after the tax deadline.

Q3. Is filing separately better if we have student loans?

It can be. If one spouse has student loans under an income-driven repayment plan, filing separately may reduce their adjusted gross income (AGI), potentially lowering their monthly loan payments.

Q4. Can we split deductions when filing separately?

No, most deductions must be claimed consistently by both spouses. For example, if one spouse itemizes deductions, the other must do so as well, even if their itemized deductions are lower than the standard deduction.

Footnotes

1. Married Filing Separately Explained: How It Works and Its Benefits.
2. Married Filing Jointly: Advantages, Tax Credits and Who Qualifies.
3. Publication 504 (2024), Divorced or Separated Individuals.

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.