Tax Filing Tips for Married Filing Separate Parents

Filing separately means you have to determine which of you takes the dependency exemption for your child.

As long as you are legally married, the Internal Revenue Service gives you the option of filing your taxes jointly or separately. It doesn't matter if you still actually live together or not, as long as no divorce decree exists. It's your call, and if you are parents, several tax ramifications exist, depending on which you choose.

Child Tax Credits

If you file separately, you must decide which of you is going to claim your children as dependency exemptions. You cannot both do it on married separate returns. The parent who claims his children also gets to claim the child tax credit for each of them. The child care credit is a bit trickier. This credit is equal to a percentage of your child care costs if you had to hire someone to be with your children so you could go to work. Neither of you can claim this credit if you live together but file separately. You must have lived apart for the last six months of the year.

Tuition Credits

If your children attend college, you lose most of your education credits and deductions by filing separately. Neither of you may deduct student loan interest or tuition costs. The IRS also bars you from claiming the lifetime learning credit or American opportunity credit for your children's educational costs.

Child Support Factors

If you're married and filing separately, but you're not living together, your filing status can affect the child support that one of you might pay to the other. Most states calculate child support based on your net income after taxes. When you file separate married returns, each of you generally end up paying more in taxes. This reduces your net income, or what is left after taxes. If you're the parent paying support, the court will usually calculate it using this lesser amount. This will result in a smaller child support obligation. However, if one of you owes child support from a previous relationship and is behind in the payments, filing separately protects the non-owing spouse from having her share of any joint refund intercepted to pay the arrears.

Medical Costs

Both parents can claim a tax deduction for any medical bills they pay for their children, regardless of who claims them as dependency exemptions. However, this deduction is limited to your medical bills and insurance premiums in excess of 7.5 percent of your AGI, or adjusted gross income after all other deductions. If you're married and filing separately, this limits some of your deductions and results in a higher AGI. You'll have to reach a higher threshold before you can deduct medical costs. However, if you're the parent claiming your children as dependents, this will lower your AGI. The threshold would be less, so you would be able to deduct more of your medical expenses.

Other Options

Both you and your spouse do not have to file separate married returns if you choose not to file jointly. One of you can reclaim some credits and deductions that would otherwise not be available to you by filing as head of household instead. In order to file as head of household, you would have to have lived apart during the last six months of the year and provide at least half of the income into the household.

References

• Bankrate.com; Sometimes It Pays To File Separately; Dana Dracht
• Resources for Attorneys; Divorce and Tax Returns; Warren R. Shiell
• University of California, Irvine: Frequently Asked Questions About Eligibility For the Student Loan Interest Deduction
• IRS.gov: Publication 501
• Turbo Tax: Tax Exemptions and Deductions For Families