3 Reasons Married Couples Should Consider Filing Taxes Separately (2024)

As a general rule, you shouldn’t wait until the last second to file your tax return. It helps to plan and make certain decisions ahead of time to speed up the process. For one, if you’re married, you’ll need to decide whether you will file a joint return or separate returns. Typically, a joint return is the smartest move, since you can cash in on some valuable tax breaks. But sometimesit makes more sense to file on your own. A financial advisor can help you optimize the best tax strategy for your financial goals.

1. One of You Is Self-Employed

Whether you own a small business or work as a freelancer, your taxes will look very different from someone with a traditional 9-to-5 gig. First, you’reresponsible for paying income tax on the money you earn. Then you also have to coveryour Social Security and Medicare tax. For 2023 and 2024, the self-employment tax rate is 15.3%.

Since your taxes aren’t being taken out during the year, you’re generally expected to make estimated quarterly payments (every three months) to cover the amount of tax you owe. If you haven’t been doing that or you underestimated what to set aside, that can add to your joint tax liability or take a big bite out of your refund. Splitting your taxes up may disqualify you from claiming certain credits or deductions. However, it can also minimize the amount of tax you’ll owe overall.

2. You’re Struggling With Student Loan Debt

Student loan debt in the U.S. has reached staggering proportions and approximately 70% of students leave school with loans. The average student loan debt in 2023 was $37,338 for federal loan debt and $54,921 in private student loan debt.

For grads who are struggling to find their way in the job market, paying student debt down can be a challenge. Opting for an income-dependent repayment plan can offer some short-term relief but qualifying can be a challenge if you’re married.

If you file your return jointly, an income-based repayment plan will consider both you and your spouse’s income. This happenseven if only one of you carries the responsibility of paying the debt. When you file separately, only your income is taken into account to determine what kind of payments you qualify for. Again, you’re sacrificing certain other tax benefits. If you don’t have kids and normally take the standard deduction, you may not feel as much of a pinch.

3. You Have a Lot of Itemized Deductions

Deductions can be a major boon at tax time since they reduce your taxable income. However, the IRS limits how much you can write off based on what you make. If one or both of you have a substantial number of deductionsto claim and there’s a pretty sizable gap in what you earn, filing separate returns can get you both the full amount of tax benefits.

For example, let’s say you experienced a serious illness or injury and you racked up some big out-of-pocket medical expenses. You can then deduct the amount that exceeds 7.5% of your adjusted gross income (AGI).

So, as an example, if your AGI is $45,000, you may be able to claim unreimbursed medical expenses over $3,375, which is 7.5% of your income. But, ifyour spouse earns $150,000, combining both incomes on your taxes is going to significantly reduce the tax benefit you’d get from the deduction if you were able to claim it all. In this case, going solo would probably yield the bigger advantage.

Bottom Line

These are just some of the most important things married couples should keep in mind when planning their tax strategy. If you’re getting divorced or you’re worried about being liable for your spouse’s tax debt, filing separately may be a no-brainer. When you’re trying to decide what the best choice is, running the numbers can give you an idea of how much you stand to gain or lose either way.

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