The Internal Revenue Service clearly states that married taxpayers will end up paying more income taxes when they file separate returns rather than joint ones. Therefore, unless you have other nontax reasons for filing separately, such as not wanting to share liability with your spouse, you will get back more on your taxes when filing a joint return.
Qualifying to file a joint return with your spouse only requires that you be married by the last day of the tax year. In addition, both you and your spouse must agree to file your taxes jointly and separately sign the joint return. When you file this way, it’s possible to receive more money back on your taxes since you can claim the largest standard deduction available, which in 2011 is $11,600. Additionally, more of your income is taxed at lower tax rates, since the income ranges within each bracket include more income for married taxpayers filing jointly than those filing separately. In 2011 for example, married couples only pay 10 percent on their first $17,000 of taxable income. However, when filing separately, only the first $8,500 of your taxable income is subject to the 10 percent tax rate, with the excess subject to higher rates of tax.
Filing a separate return has many tax disadvantages, with the end result being that you will receive less of a tax refund. This is simply because your standard deduction is the same as a single filer and your income moves through the tax brackets more quickly than joint filers, thereby increasing the amount of income tax you owe. For example, if during 2011 one spouse earns $125,000 and the other doesn’t work, when the earning spouse files a separate return, a top tax rate of 33 percent is imposed. However, when filing jointly, the top rate is only 25 percent. In this scenario, you will receive more money back on a joint return if you overpay your tax during the year.
Tax Deduction Differences
In addition to the higher standard deduction and better tax brackets, there are other disadvantages to filing separate returns than can reduce the amount of tax refund you receive. When filing separate returns, and one spouse itemizes deductions, the other spouse cannot also itemize deductions. What is even worse is that the standard deduction is not available to that nonitemizing spouse either. This can negatively influence the amount of your tax refund since more of your earnings will be subject to tax.
Tax Credit Differences
The IRS also makes most of the tax credits unavailable to both spouses when filing separate returns. Neither of you can claim the American opportunity or lifetime learning credit for the education expenses you incur for yourselves or your dependents. And if you incur other expenses to care for one of your dependents, you are ineligible to include those costs in the child and dependent care credit. Other tax credits you cannot claim include the credit for the elderly and disabled and the earned income credit.