How to pick the best option

Married couples have a choice each year: file their taxes jointly or separately. While the tax code generally rewards sharing, there are scenarios where filing pays separately, experts say.

While “married filing jointly” includes a single return, “married filing separately” means you and your spouse have separate filings with individual income, credits and deductions.

“I’ve found that joint filings happen 95% of the time,” says Or Pikary, a certified public accountant and wealth advisor at Mariner Wealth Advisors in El Segundo, California. But couples need to crunch the numbers to see the best options.

“There are many factors that contribute to making this decision,” said Sheneya Wilson, CPA and founder of Fola Financial in New York.

Here are some situations where filing for a separate marriage, experts say.

With an income-based student loan repayment plan, the monthly payment depends on your adjusted gross income, and is usually higher when filing taxes together.

This is one scenario that can be applied separately, Pikary said. But you have to consider other downsides of the file.

Some couples, whether they are happily married or planning to divorce, prefer to keep their finances and part of their taxes separate, Wilson said.

For example, one spouse may be a business owner who pays monthly taxes and the other spouse may have taxes withheld from each paycheck. “They may want to keep their tax liability with each spouse,” he said.

When you file your taxes, you use the standard deduction or the itemized deduction, whichever is higher.

For 2022, the standard deduction for married couples filing jointly is $25,900, making it difficult to claim tax breaks for medical expenses, charitable gifts, state and local taxes and more.

But the standard deduction for separate filers is $12,950, which is easier to exceed, Wilson said. If a spouse has a significant itemized deduction while it is still below $25,900, it may be split.

There is one caveat, however: You can’t mix and match, Pikary said. Both spouses must itemize or take the standard deduction on separate returns, which may not provide the same benefits.

While filing separately may seem preferable in some scenarios, there are other options to consider.

For example, separate filers typically cannot make Roth individual retirement account contributions because the modified gross income limit is $10,000.

The IRS also blocks or limits other write-offs for separate filers, such as the earned income tax credit, the education tax credit, the student loan interest deduction and more, Pikary said.

“If you go down that route, you may end up losing a potential tax break,” he said, noting that it’s important to analyze both ways to determine the best option.