Your married clients have a choice when it comes to filing their taxes. They can either file as:
- Married filing jointly (MFJ) – spouses are combined on one 1040 tax return, or
- Married filing separately (MFS) – each spouse files their own 1040 tax return
Whether they wed on January 1st, December 31st, or anytime between, newlyweds (and anyone legally married) are eligible for several tax breaks if they file their taxes jointly. Some married taxpayers, however, may choose to file separately for personal or professional reasons. This article will cover the documents needed, eligibility requirements, and the advantages of different filing options, helping tax preparers assist their clients in selecting a filing status.
When should married clients file jointly or separately?
While married filing joint is usually the most beneficial, there are situations where married filing separately is worth considering. Your role is to help clients weigh both options and determine which aligns best with their financial goals. A great starting point is to ask questions that uncover key factors that allow you to compare married filing separate vs. married filing joint:
- Does a spouse pay or owe alimony or child support? If one spouse pays alimony or child support, filing separately could affect the deductions and credits available, as well as the taxable income for both parties.
- Did they buy or sell a home? Selling a home can have tax implications. When filing jointly (MFJ), you can exclude more capital gains from taxes than if you’re filing separately (MFS).
- Are they on a mortgage together or only one? If both spouses are on the mortgage, filing jointly (MFJ) may be more beneficial for combined income and deductions. If only one is responsible for the mortgage, it can affect their tax burden if they file separately.
- Does one spouse have any significant debt or capital gains? If one spouse has significant debt or capital gains, filing separately may help protect the other spouse from being liable.
- Did they have a baby? Having a baby can provide tax benefits like the Child Tax Credit, which is usually better for married couples filing jointly (MFJ).
- Were there a lot of out-of-pocket medical expenses? Medical expenses are deductible only if they exceed a specific percentage of adjusted gross income (AGI), and filing jointly may lower the AGI threshold, resulting in larger deductions.
- Does one spouse have significant student loan debt? If one spouse uses an income-driven repayment plan (IDR), filing separately may lower monthly payments because only the borrower’s income counts. Filing jointly often increases payments.
- Do you live in a community property state? In states like California or Texas, income and deductions are often split 50/50 when filing separately, which can reduce the benefit of MFS unless exceptions apply.
What is needed to file jointly?
Your clients can file their taxes jointly or separately if they are legally married by December 31 of the tax year. This rule applies even if they live apart but aren’t legally separated.
If one spouse has died during the tax year and the other hasn’t remarried, the surviving spouse can still file a joint return. Additionally, couples in legally recognized common-law marriages in their states can also choose to file as married.
What documents are required for clients who want to file jointly?
Clients don’t need special paperwork just because they are filing jointly, but they do need to collect essential documents for accurate tax preparation, including:
Personal identification
- Social Security numbers for both spouses
- Photo IDs (driver’s license or state-issued ID)
Income documentation
- W-2 forms from all employers
- 1099 forms for freelance, investment, or other income
- Records of unemployment benefits or other taxable income
Deductible expenses
- Mortgage interest statements (Form 1098)
- Property tax records
- Receipts for medical expenses
- Charitable donation receipts
Tax credits & adjustments
- Education expense statements (Form 1098-T)
- Healthcare coverage details (Form 1095-A, B, or C)
- IRA contribution records (Traditional or Roth)
What are the benefits for clients filing jointly?
There are several advantages for clients who choose married filing joint (MFJ):
- Access to various tax credits including the Child Tax Credit, Dependent Care Credit, adoption credit, Earned Income Tax Credit, and American Opportunity and Lifetime Learning Education Tax Credits
- Highest standard deduction available to individual taxpayers and generally more favorable tax brackets, reducing taxable income significantly
- Tax-free exclusion, typically of US bond interest and Social Security benefits
- Credit for disabled or elderly status and deductions for some educational expenses, including student loan interest
- Deduction of certain retirement plan contributions and some losses
- Higher phase-out thresholds and income limits for credits and deductions
What are the disadvantages of married couples filing jointly?
While married filing joint (MFJ) offers many benefits, there are some potential drawbacks clients should consider:
- Both spouses share responsibility for the total tax liability, meaning one partner’s taxes can affect the other.
- Combining incomes can sometimes push couples into a higher tax bracket, resulting in a larger overall tax bill compared to filing separately.
- Medical deductions can be limited, as the taxpayers can only deduct expenses exceeding 7.5% of their adjusted gross income. In some cases, filing separately may allow a couple to deduct more medical expenses, especially if one spouse has a lower income.
Couples who are separated but not legally divorced might be hesitant to file jointly, but it may result in the loss of certain tax benefits.
What are the benefits for clients filing separately?
There are some limited circumstances where a married taxpayer may choose to file separately, including:
- Separation of tax liability between spouses, so a spouse is only responsible for the accuracy, completeness, and tax due on their own return
- Significant itemized deduction from one spouse that lowers their overall tax exposure
- State-by-state considerations of MFJ vs. MFS
What are the disadvantages of married couples filing separately?
married filing separately (MFS) can make sense in certain situations; however it often comes with disadvantages to consider:
- Filing separately will likely increase tax exposure and the amount of tax paid, compared to filing jointly
- If either of the spouses have any student loan debt, they will not be able to take that deduction for the interest
- Limited to a smaller retirement contribution deduction
- Losing access to various tax credits and benefits
- If one spouse has substantial medical expenses, filing separately may allow that spouse to deduct a larger portion of those expenses
- Some states have tax benefits that favor married couples filing separately
TaxSlayer Pro’s practice tax returns can help you gain a better understanding of how to help your clients file jointly or separately.
What other filing options are available?
There are a few other tax filing statuses, including single and head of household. A single filer is typically unmarried and without dependents, leading to lower income thresholds for tax brackets. If your client is unmarried but financially supporting a qualifying dependent and covering more than half of their household’s expenses, they might consider filing as head of household. Choosing this status may offer a higher standard deduction and a lower effective tax rate than filing as single. After getting married, your clients will be able to file as single again unless legally separated or divorced, or until the tax year following a spouse’s death.
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