As a physician, you may be an expert in your field, but the United States Tax Code is enough to make even the most educated American dizzy.
Whether you have been married for years, you’re a newlywed, or you’re simply considering the tax implications of your future plans, tax preparation isn’t only for tax season.
While a tax professional or Certified Public Accountant (CPA) can help you understand your unique situation, there are a few key things we can share to help you learn more about filing taxes and navigating your federal income tax liabilities.
Married Filing Jointly vs. Separately
You may be wondering, “How do I know whether to pick married filing separately (MFS) or married filing jointly (MFJ) when I file my tax return?”
You are able to choose between either option as long as you are legally married, but it can seem difficult to make sense of the benefits and disadvantages of your options if you don’t fully understand your tax situation.
Typically, married filing jointly will provide the most tax benefits, however, there are some instances where married filing separately may be more beneficial. It all depends on your situation.
In this article, we’ll dive deep into the major advantages and disadvantages of both married filing jointly and married filing separately, so you can make the best decision for yourself.
American taxpayers aren’t all created equally. Different tax situations have different tax filing statuses, which come with different benefits, deductions, and liabilities.
We’ve outlined the different definitions below:
- Single filing status: For single, unmarried, divorced, or separated taxpayers
- Married Filing Jointly filing status: For married couples choosing to file a single return
- Married Filing Separately filing status: For married couples choosing to file separate returns
- Head of Household filing status: For unmarried taxpayers who pay more than half of the household expenses and have been living with their parents for at least six months
- Qualifying Widow(er) with Dependent Child: For taxpayers whose partners have passed away within the last two years and they have a dependent child
What is the difference between married filing jointly and married filing separately?
The difference between married filing jointly and married filing separately is the number of tax returns. With MFJ filing status, taxpayers combine their income on a joint tax return and both individuals share the tax liability. With MFS filing status, taxpayers file a separate return where they can maintain responsibility for their income, deductions, and credits.
In some cases, MFS filing status can lower tax obligations when taxpayers take advantage of itemized deductions.
Why are married couples filing separately?
In certain situations, filing separately while married can be the most tax-efficient option. It can be particularly advantageous to file separately when spouses have a significant difference in income. In this case, the lower-income spouse can reduce their individual income tax obligations and often receive a larger refund through itemized deductions.
It can also make sense for married couples to file separately if they’re going through a divorce or have been legally separated for at least six months.
Common Tax Deductions and Liabilities
All American taxpayers are eligible for certain tax deductions and are liable for taxes based on their income, lifestyle, and expenses.
We’ve outlined the standard tax deductions, qualifying expenses, and expected liabilities physicians may encounter.
Standard Tax Deductions
In 2023, the standard deductions for each tax filing status are as follows:
- $13,850 for single filers
- $13,850 for married couples filing separately
- $20,800 for heads of households
- $27,700 for married couples filing jointly
The standard deduction is a dollar amount that all taxpayers can deduct from their taxable income. In some situations, you can reduce your taxable income further by itemizing your expenses and increasing your deduction amount.
Taxpayers may choose to itemize their deductions if their expenses for the year exceed the standard deduction for their filing status.
The following expenses are eligible for itemized deductions:
- Unreimbursed medical and dental expenses
- Long-term care premiums (if they exceed 10% of an individual’s adjusted gross income)
- Mortgage and home equity line of credit interest
- Property taxes/state and local taxes
- Charitable donations
- Casualty and theft losses
If you qualify for itemized deductions, you will need to submit a Schedule A form (Form 1040).
Common Tax Liabilities
In general, American taxpayers are on the hook for any income they earn.
For many Americans, this liability primarily includes income earned from employment or 1099 contracting. However, people in higher income brackets often have more disposable income left over to invest in other assets.
Capital gains taxes are levied when a taxpayer sells an investment, real estate, or other asset that has appreciated in value. If you’ve had the asset for less than a year and sold it, it is considered a short-term gain and it is included in your income.
But if you’ve held onto the asset for longer than a year, it becomes a long-term gain. Long-term gains are subject to capital gains taxation.
We’ve outlined the capital gains tax rate below.
|Capital Gains Tax Rate||Single Filer Taxable Income||Married Filing Separate Taxable Income||Head of Household Taxable Income||Married Filing Jointly Taxable Income|
|0%||$44,625 or less||$44,625 or less||$59,750 or less||$89,250 or less|
|15%||$44,626 to $492,300||$44,626 to $276,900||$59,751 to $523,050||$89,251 to $553,850|
|20%||$492,301 or more||$276,901 or more||$523,051 or more||$553,851 or more|
Married Filing Jointly
To qualify for the married filing jointly filing status, you must be married as of the end of the year.
If you married during the year or your spouse died during the year, then you can file MFJ.
Additionally, if you become divorced under a legal decree, then you are considered unmarried as of the end of the year, and you cannot use the married filing jointly filing status.
The IRS incentivizes couples to file MFJ by providing more favorable tax brackets for MFJ compared to the Single filing status.
Let’s look at an example from a 2020 scenario to illustrate this point.
In this example, we are comparing a single person and a married couple who both have the same $150,000 taxable income.
Based on the 2020 tax rates, the single person will pay $30,079 in taxes, and the married couple will pay $24,580 in taxes.
|Tax Rate||MFJ Tax Bracket For Taxable Income Over $150,000||MFJ Tax Due For Taxable Income of $150,000||Single Tax Bracket For Taxable Income Over $150,000||Single Tax Due For Taxable Income of $150,000|
The IRS also provides better deductions, credits, and more favorable income limits for these deductions for married couples who file jointly.
Some deductions and credits are not available under the married filing separately filing status which makes married filing jointly advantageous in this regard.
Other deductions and credits such as the Child Tax Credit, traditional IRA deduction and contributions, Roth IRA contributions, capital loss deduction, and the Child and Dependent Care Tax Credit are limited when you file separately.
We’ve outlined the 2023 tax rates below. You’ll want to consider your eligible credits, deductions, and income as you decide whether it makes sense to file jointly or separately.
|Tax Rate||Single Filer in 2023||Married Filing Separately in 2023||Married Filing Jointly in 2023||Head of Household in 2023|
|10%||$11,000 or less||$11,000 or less||$22,000 or less||$15,700 or less|
|12%||Over $11,000||Over $11,000||Over $22,000||Over $15,700|
|22%||Over $44,725||Over $44,725||Over $89,450||Over $59,850|
|24%||Over $95,375||Over $95,375||Over $190,750||Over $95,350|
|32%||Over $182,100||Over $182,100||Over $364,200||Over $182,100|
|35%||Over $231,250||Over $231,250||Over $462,500||Over $231,250|
|37%||Over $578,125||Over $346,875||Over $693,750||Over $578,100|
Considerations for High-Income Earners
When incomes are largely different between spouses, it may be beneficial to file MFJ instead of MFS. For example, a physician earns $400,000 of taxable income and her spouse stays at home with the kids and does not have an income. If they filed jointly, they would be in the 32% tax bracket and pay $90,030 in taxes.
If they filed married filing separately, they would both be in the 37% tax bracket and pay $116,500 in taxes. That’s $26,000 in tax savings for filing MFJ.
You will need to calculate your tax return both as MFJ and MFS to determine which would make the most sense for you.
Married Filing Jointly vs Separately Tax Brackets
The following table outlines the tax rates for MFJ and MFS filing status.
|Tax Rate||MFJ Tax Bracket For Taxable Income Over||Single Tax Bracket For Taxable Income Over||MFS Tax Bracket For Taxable Income Over|
It is also more convenient to file MFJ vs. MFS. When you file jointly, you only need to file one return for both of you. When you file separately, you will need to file two separate returns.
When you file MFJ, you and your spouse are jointly liable for the tax liability reported on your tax return.
In other words, both spouses are responsible for the tax owed, even if one spouse earns all the income or if someone is improperly reporting their income, deductions, and credits.
If the IRS finds out your spouse was improperly reporting their income and deductions, there are some relief options you may request to help you avoid tax liability due to the wrong actions of your spouse, but you are otherwise assumed to be responsible.
There are also some instances where you will pay more taxes when you file MFJ than if you remained a single filer. These scenarios occur mainly when families have two high-income earners.
For example, if you and your soon-to-be spouse are both physicians making $600,000, your combined income is $1,200,000. When you are single, you both will be in the 37% tax bracket, but you will each only pay $186,426 in taxes ($372,852 combined).
Once you get married, you will pay $381,147 in combined taxes. Remaining single would save you $8,300 in taxes annually.
There aren’t many disadvantages to the married filing jointly filing status, but they are things you should keep in mind.
Married Filing Separately
To qualify for the married filing separately filing status you must be married and decide to file your returns separately. Why would you file your taxes separately from your spouse? There are a few reasons.
First, if you don’t want to be jointly liable for your spouse’s taxes, you can consider filing your taxes separately. This makes you liable for only your income, deductions, credits, and taxes. Your spouse is only liable for their own too.
Also, if you are planning on separating from your spouse and the divorce has not been legally finalized yet, you might want to file separately to keep your finances separate until the divorce is legalized by the courts.
Additionally, filing separate tax returns may potentially qualify you for lower student loan payments and increase the amount of student loan forgiveness available to you.
However, you will need to run the scenarios and see if this is the right move for you. When you file separate returns, your tax bill will likely be higher, so you want to make sure the lower student loan payment outweighs the higher tax bill.
Married filing separately is typically known for being the least advantageous filing status, and rightfully so.
When you file as MFS, you cannot take any of the education deductions or credits including the student loan interest deduction, American Opportunity Credit, and Lifetime Learning Credit.
Many other deductions and credits are reduced when you file a separate tax return from your spouse.
Child Tax Credit
If you file MFJ, the Child Tax Credit does not begin to be reduced until your combined Modified AGI is greater than $400,000. However, if you file as MFS, then that limit is reduced to $200,000.
IRA Deductions and Contributions
The traditional IRA deduction is another deduction that is severely limited by the MFS filing status.
If you file separately, have MAGI greater than $10,000, are covered by a workplace retirement plan, and live with your spouse throughout the year, then you cannot deduct any of your traditional IRA contributions on your tax return.
If you did not live with your spouse, and you file as MFS, then your contribution and deduction limit is based on the Single filing status.
Roth IRA contributions are also limited by the MFS filing status. If your MAGI is greater than $10,000 and you lived with your spouse throughout the year, then you cannot contribute any money to your Roth IRA for that year. If you did not live with your spouse, and you file as MFS, then your contribution limit is based on the Single filing status.
Capital Loss Deduction
Your capital loss deduction is reduced when filing as MFS. Instead of being able to deduct $3,000 of capital losses against your ordinary income, you will only be able to deduct $1,500. You can still carry excess losses over to future years.
Child and Dependent Care Tax Credit
Typically, you cannot take the Child and Dependent Care Tax Credit if you file separate tax returns (with some exceptions).
The Adoption Credit is also limited if you file married filing separately. Adoption expenses can be deducted from your tax return the year after you incur the expense until the adoption is finalized. If you file MFS in the year expenses become allowable, you cannot deduct them on your tax return.
For example, in 2017 you incurred $2,000 in adoption-related expenses, in 2018 you incurred $3,000 and in 2019 you incurred $4,000. The expenses in 2017 can generally be deducted from your 2018 tax return. However, if you file as MFS in 2018, you cannot deduct the expenses incurred in 2017.
Savings Bond Interest Income
You cannot exclude from your income interest income from U.S. savings bonds used for education expenses. This income will now be included in your tax return as an item of income.
Social Security Benefits
When you file MFS, you must include a greater percentage of your social security benefits as taxable income on your tax return.
This could be up to 85% of your social security benefits.
Finally, you will be filing separate returns, so this means you will have two returns instead of one like when you file jointly.
As you can see, there are quite a few downsides to filing your tax return separately from your spouse.
Additional Things To Know About Filing Separately
There are a few additional things to know when it comes to filing your returns separately as a married couple.
If you have kids, you need to know who will claim each kid as a dependent.
You can decide with your spouse who will claim each kid, or if the IRS needs to decide, the kid will go on the spouse’s tax return who has the highest AGI (if you and your spouse live together).
If you and your spouse live apart from each other, then whomever your kid lived with the longest will get to claim them on their tax return. This is important, especially for tax breaks such as the Child Tax Credit.
Additionally, when you file as married filing separately, both spouses must choose either the standard deduction or itemized deductions. You can’t have one spouse claim the standard deduction and the other spouse itemizes their deductions. The IRS won’t allow it.
How do you determine who itemizes which deduction?
If you paid for the expense (i.e. medical expense, state/local income tax, or charitable contribution) from separate funds, then the deduction is itemized on the spouse’s return who paid for the expense.
If you paid the expense, such as interest on a mortgage that both you and your spouse own, from a joint account, then you each will deduct half of the expense on your separate returns.
You will want to make sure you keep good documentation regarding who took what deduction when you file separate returns.
Filing separately in states governed by community property laws adds an extra layer to your tax return.
When you live in a community property state, own community property with your spouse, and file separate returns, each spouse must report half of all the community property income received by the couple as well as their separate income.
A big thing to note here is that community property income includes the full salary of each spouse.
For example, if Spouse One earns $200,000 and Spouse Two earns $0, and you file separate returns, then $100,000 of income is attributed to Spouse One, and $100,000 of income is attributed to Spouse Two.
Additionally, actual property, such as rental real estate, that is acquired during the marriage will likely be considered community property which means you will share that income too when filing separate tax returns.
Navigating Taxes Through A Divorce
If you are going through a divorce, it can have a major impact on your tax situation. In general, it’s a good idea to contact your employer after a divorce or separation so they can update your withholding on your W-4.
If you are paying or receiving alimony, that could also have an impact on your tax situation. People who receive alimony will need to make estimated payments each quarter or they can expect to incur fees.
Taxpayers going through a divorce will also need to agree on who will claim the children as dependents and report any property transfers, if necessary.
If you want to file married filing separately because you are living apart from your spouse you may qualify to file as Head of Household, even if you aren’t divorced or legally separated. This would give you a higher standard deduction and better tax rates.
For this to happen, you need to be considered unmarried at the end of the year as defined by the IRS.
The IRS considers you unmarried if you meet all of the following criteria:
- You file a separate return from your spouse.
- You paid more than half the cost to maintain your own home throughout the year.
- Your spouse did not live in your home for the last six months of the year. If they were gone due to a temporary absence, then you will not meet these criteria.
- Your home was the main home for your child, stepchild, or foster child for more than half the year.
- You must be able to claim the child as a dependent.
If you were thinking about filing MFS, and you meet all the above criteria, then you should consider filing as Head of Household instead.
Examples of Married Filing Jointly vs Separately
|MFJ Example||Spouse 1||Spouse 2||Total|
|Schedule A – Itemized Medical Expense|
|Combined AGI of Both Spouses||$200,000|
|7.5% of AGI (.075 * $200,000)||$15,000|
|Itemized Deduction ($30,000 – $15,000)|
However, using the same facts, if the couple files separately, they will save $3,172 in taxes.
Since the medical expense is fully attributable to Spouse 1, if the couple files separately, then Spouse 1 can itemize the medical expense on his tax return.
Using the 7.5% rule for itemized medical expenses, Spouse 1 could take an itemized deduction of $26,250, netting him a total tax liability of $2,455.
Spouse 2 must also itemize her deductions because of the rules around tax returns that are filed separately, so her tax liability will be $24,580. All else being equal, the couple’s new total tax liability is $27,035 which is $3,172 less than if they would have filed a joint return.
|MFS Example||Spouse 1||Spouse 2||Total|
|Schedule A – Itemized Medical Expense|
|Spouse 1 AGI||$50,000|
|7.5% of AGI (.075 * $50,000)||$3,750|
|Itemized Deduction ($30,000 – $3,750)||$26,250|
Frequently Asked Questions
Is it better for married couples to file jointly or separately?
Deciding between married filing separately and married filing jointly is going to be based on your situation, and there is a lot to consider.
Filing jointly is typically your best option, but make sure you run the numbers to see if married filing separately might be better for you.
If you don’t want to do this yourself, work with a tax accountant to help you. There aren’t many situations where filing a separate return will be more beneficial, but you never know when it might save a few thousand dollars in taxes.
When should married couples file separately?
An example of a situation where it would be beneficial to file separately from your spouse is if one of you has a large itemized deduction that you could use if you filed separately, but when you file jointly you can’t itemize because your AGI is too high. Here’s an example.
Spouse 1 has an AGI of $50,000, and Spouse 2 has an AGI of $150,000. Spouse 1 incurs a medical expense of $30,000 during the tax year that is 100% fully attributable to him.
If the couple files jointly, they will take the standard deduction because the standard deduction will be more than what they could take if they itemized the medical expense. This is because of the 7.5% floor on medical expenses when you want to itemize them.
If the couple tried to itemize this expense when they file jointly, they would only receive a $15,000 deduction which is less than the standard deduction, so they will take the standard deduction for $24,800. Filing jointly nets them a tax liability of $30,206.
Do you pay more taxes filing separately or jointly?
Joint filers generally receive higher income thresholds for tax breaks and certain advantages when they make retirement contributions compared to single filers.
However, it can be more tax efficient to file separately if you have a significant income disparity between spouses or a lot of out-of-pocket medical expenses.
Consulting a CPA or other tax professional can help you decide the right option for your unique situation.
How do you find a CPA?
You can find a CPA by conducting a quick Google search, consulting a state or national association of tax preparers, or asking your friends and family for referrals.
After you’ve found a few CPAs you’re interested in, you can begin vetting them by considering the following:
- Confirm they specialize in tax preparation: Not all CPAs work in tax preparation for individuals and married couples. Some professionals work exclusively with businesses or the government and those professionals wouldn’t be the best fit for filing tax returns.
- Inquire about their experience in the field: Experienced tax professionals will have a more nuanced understanding of the tax code, but a new tax professional may be the most up-to-date on technology and recent changes to the tax code. Consider a tax professional who has the most extensive experience in filing returns for married couples.
- Verify their Preparer Tax Identification Number in the IRS Return Preparer Office Directory: The IRS assigns qualified CPAs who prepare taxes a Preparer Tax Identification Number (PTIN) that anyone can look up in the IRS directory.
- Look up their license with your state’s Board of Accountancy: CPAs are also required to be licensed by the state. You can find information about a CPA’s license status, any complaints made against them, and any disciplinary action taken.
- Determine if they offer year-round tax advice: A good CPA will build a relationship with their clients by consulting on year-round tax preparation questions and providing personalized advice.
- Request a fee schedule: Every tax professional charges differently. It can be by the hour or a flat fee based on the complexity of your situation. You’ll want to find a CPA whose fees include state and federal tax returns.
- Make sure they offer e-filing: The IRS requires tax preparers who file 11 or more tax returns per year to offer e-filing. The IRS also recommends taxpayers e-file to expedite the process, provide additional information security, and ensure faster refunds.
CPAs aren’t the only qualified tax professionals who can help you prepare your taxes. Enrolled Agents and tax attorneys are also able to assist married couples with filing taxes, finding the most tax-efficient strategies for long-term goals, and providing trustworthy legal advice.