NEW YORK (MainStreet) - Generally speaking, it is better for a married couple to file a joint return than to file separately, as separate filings will usually result in the same or greater combined tax liability. But in some cases it may pay to file separate returns.
Because of the 7.5% of Adjusted Gross Income (AGI) exclusion for medical expenses and 2% exclusion for miscellaneous deductions, if one spouse has excessive deductions in either of these categories then applying the percent exclusions to a lower separate AGI could result in less combined tax. If you have children, filing separate returns could also possibly increase your Child Tax Credit.
It's not only federal rules that can make filing separately advantageous, either. You must consider the state tax consequences when determining how to file as well, as in most cases you must use the same filing status on your resident state income tax return that you use on your federal return. Filing separately may cost $150 more in federal income tax, but in some cases it could save you twice that in state income tax.
Whenever you are faced with choices on your federal return you should do separate calculations to see which option will result in the lowest overall tax. Be sure to include any non-resident as well as resident state tax returns. And you should calculate the Alternative Minimum Tax as well as the “regular” tax under each option.
In certain situations you will not be able to claim a specific tax benefit, or you will get a reduced benefit, if you file separate federal income tax returns. You should consult a tax professional if you are considering filing separately. As I have written before, tax professionals are acquainted with changes in tax laws and will help you chart the best course through your 1040s.
To make your tax preparer happy and ensure you get the best tax deal possible, check out MainStreet's roundup of the essential documents to bring your tax preparer.