Here’s when married filing separately makes sense, according to tax experts

Married couples have the choice to file taxes jointly or separately every season. While filing together generally pays off, splitting returns may be better in some scenarios, financial experts say.

Married filing separately involves two individual returns, each reporting their own income, deductions and credits. And the tax code typically penalizes those filing apart.

“The IRS seems to have the viewpoint that if someone is filing separately, they’re doing something shady,” said certified financial planner John Loyd, owner at The Wealth Planner in Fort Worth, Texas, explaining how it may invite a bit more scrutiny.

Still, the tax benefits may outweigh the downsides for some couples. Here’s what to know about filing separately.

If you’re part of an income-based student loan repayment plan, it may make sense to file taxes separately since earnings typically determine what’s due every month.

Filing jointly may trigger higher payments, Loyd said, but you need to weigh the other trade-offs before filing apart to lower your bills.

You may also consider separate filings to reduce adjusted gross income if you have high medical bills, said Marianela Collado, a CFP and CPA at Tobias Financial Advisors in Plantation, Florida.

If you itemize deductions, you may claim a tax break for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income, she said. 

For example, with an adjusted gross income of $100,000, you can write off eligible costs over $7,500. The lower your income, the easier it becomes to cross that threshold.

However, spouses filing separately must either itemize or take the standard deduction, Collado explained. They can’t use different strategies.

Another common reason to file taxes separately are cases of financial infidelity.

For example, you may sever returns if you’ve split from your spouse and can’t count on them to file taxes accurately or on time, said Monica Dwyer, a CFP, vice president and wealth advisor at Harvest Financial Advisors in West Chester, Ohio.

“You’re putting yourself on the line for that information,” she said, explaining how signing a joint return may create liability for mistakes or tax fraud.

And there’s no statute of limitations for the IRS to pursue cases of fraud, adding further risk for divorcing spouses.

“If couples are going to file separately, they have to look at what they’re giving up,” said John Gehri, a CFP and vice president at Harvest Financial Advisors in West Chester, Ohio.

For example, most separate filers can’t make Roth individual retirement account contributions since the IRS slashes the modified adjusted gross income limit to $10,000.  

And the agency blocks or limits other write-offs for separate filers, such as the student loan interest deduction, education tax credits and more, Gehri said.  

Whether you’re working with a tax professional or filing yourself, try running the numbers both ways before picking a status, he suggested.

“As a general rule, I really try to avoid filing separately,” Loyd from The Wealth Planner added. “You don’t want the spotlight shining on your tax return.”