When Does Married Filing Separately Make Sense?

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By Bonnie Lee / Taxpertise / Published June 02, 2011 / FOXBusiness

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If you are married, you have a choice of how to file your tax return.

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The obvious, and usually most beneficial, filing status is married

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filing joint. However, if you and your spouse lived apart the last six
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months of the year and you have a qualifying person who qualifies

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you for head of household status, you may select to file as head of

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household. Your tax bill will be considerably cheaper.

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Married filing separately is usually the most expensive filing method

tax wise. But sometimes this method may prove to be a money and

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stress saver, especially if your spouse is something of an outlaw.

By using this filing status, you can ensure that your tax issues do
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not comingle with those of your spouse and you avoid IRS
collection problems, liens and levies by keeping your finances and

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taxes separate from those of your spouse. If you live in a

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community property state, youll likely need to do more to protect

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yourself than resorting to this filing status.

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Married filing separate usually results in higher tax liabilities. Heres

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why:

http://www.foxbusiness.com/personal-finance/2011/06/02/does-married-fili... 10/8/2014

When Does Married Filing Separately Make Sense? | Fox Business

1. In general, the tax rate for married filing separately is higher,

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rendering a higher total tax bite. I run the numbers both ways for

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my clients to determine if married filing separately would be

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advantageous and every once in a great while it shakes out that

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way, but not very often.

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2. You do not enjoy the following tax credits: earned income credit,
child and dependent care credit, education credits, exclusion or
credit for adoption expenses. If you lived with your spouse at any
time during the tax year, you cannot take the credit for the elderly or

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disabled.

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3. If your spouse itemizes deductions you must also itemize

deductions. Check it out: If your spouse owns the home in which
you both reside, he or she may possibly deduct the mortgage

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interest, property taxes, all the big-ticket items, leaving you with

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considerably less than the standard deduction to reduce your

Year

taxable income. That could leave a mark!

4. If you own rental real estate, you enjoy a special allowance of

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you use married filing joint status. But you dont get this special

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allowance if you are filing separately. Consider the tax bite this
creates: You do not lose the losses completely; they can be carried
forward to offset passive income in future years or go against a

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profit in the year of disposition of the rental asset.

Investing

5. Many of your allowances and deductions are slashed in half. The

capital loss deduction is reduced from $3,000 to $1,500. The first
time home-buyer credit is allowed at $4,000 rather than $8,000.
Your exemption amount for figuring the alternative minimum tax is
half what it would be on a joint return. And the child credit and
retirement savings contribution credits are also cut in half--your
spouse, of course, gets the other half, if he or she qualifies.

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6. You dont get the deduction for student loan interest.

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7. If you lived with your spouse at any time during the year, you will

Mortgage

have to include a higher percentage of Social Security benefits or

Loan Type

railroad retirement benefits in your income.

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Rate

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30 Y Fixed

4.01%

4.08%

Because your adjusted gross income (AGI) will likely be lower

15 Y Fixed

3.16%

3.23%

under married filing separate, you may enjoy a larger deduction for

30 Y Fixed
Jumbo

4.25%

4.51%

business expenses, etc.

5/1 ARM

3.27%

3.46%

If you wish, you can amend a return that was filed separately, going

5/1 Jumbo
ARM

3.20%

3.44%

back three years. However, once you file a joint return, you cannot

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expenses that are tied to the AGI like medical expenses, employee

go back and amend it to file separately. There is one exception to

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this rule which applies to surviving spouses.

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When Does Married Filing Separately Make Sense? | Fox Business

Bonnie Lee

is an Enrolled Agent admitted to practice and

representing taxpayers in all fifty states at all levels within the

Internal Revenue Service. She is the owner of Taxpertise in

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Sonoma, CA and the author of Entrepreneur Press book,

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Know, available at all major booksellers. Follow Bonnie Lee on

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Twitter at BLTaxpertise and at Facebook

Bonnie Lee

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is an enrolled agent admitted to practice and

representing taxpayers in all 50 states at all levels within

the Internal Revenue Service. She is the owner of Taxpertise in
Sonoma, Calif., and the author of Entrepreneur Press book,
Taxpertise, The Complete Book of Dirty Little Secrets and Hidden
Deductions for Small Business that the IRS Doesn't Want You to
Know.

Her new e-book Taxpertise for the Creative Mind Murder,

Mayem, Romance, Comedy and Tax Tips for Artists of all Kinds
is available at all major booksellers. Follow Bonnie Lee
on Twitter and on Facebook
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