When Does Married Filing Separately Make Sense?

For most married couples, filing jointly offers the best tax outcome. But there are situations where Married Filing Separately (MFS) is not only appropriate—it can actually be beneficial. Knowing when this lesser-used status makes sense can help you avoid overpaying and manage specific tax challenges.

Understanding MFS Status

When you file separately, each spouse reports their own income, deductions, and credits on a separate return. This generally results in a higher combined tax liability compared to Married Filing Jointly (MFJ), but there are exceptions where MFS may work in your favor.

When MFS Might Make Sense

1. Protecting Against Liability
   If you’re unsure about your spouse’s tax situation—such as underreported income, large deductions, or potential audits—filing separately can protect you from being held jointly responsible.
2. Managing Student Loan Payments
   Borrowers on income-driven repayment plans (like PAYE or REPAYE) may benefit from MFS. Filing separately keeps your spouse’s income out of your adjusted gross income (AGI), which can reduce your monthly payment amount.
3. Significant Medical Expenses or Miscellaneous Deductions
   Some deductions, like medical expenses, are limited by a percentage of your AGI (e.g., only amounts over 7.5% of AGI are deductible). If one spouse has high medical costs and a lower income, MFS can make it easier to meet that threshold.
4. Separation or Divorce
   Couples who are separated or in the process of divorcing may choose MFS to avoid complications or to establish a clear separation of finances.
5. High State Tax Bills
   In some cases, state tax laws (especially in community property states) make MFS more advantageous if one spouse has a significantly different income level or more deductions.

Limitations of MFS

There are trade-offs to consider. When filing separately, you may lose access to:

• Certain tax credits (like the Earned Income Tax Credit and education credits)
• Higher income phase-out thresholds for deductions
• Favorable treatment of capital gains and IRA contributions

That’s why this status is usually only selected when the financial benefit outweighs these limitations.

How We Can Help

A CPA can run the numbers both ways—jointly and separately—to help you determine which filing status results in the lowest overall tax liability. They can also help you weigh short-term savings against long-term tax strategies.

Not sure if filing separately makes sense for you? Contact DWD CPAs & Advisors to help you choose the best strategy for your unique financial situation.