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When should someone choose a married-filing-separately tax status?

On Behalf of | Aug 29, 2022 | Divorce |

For better or worse, laws from real estate and contracts to debts and property division treat married couples as one. The area of tax law, however, permits married couples to exist financially independent of each other. Under certain circumstances, the tax-filing status of married-filing-separately (MFS) may prove beneficial. As residents of a community property state, however, California residents have certain obligations that may limit those advantages.

What are some advantages and disadvantages of MFS?

Individuals who choose the MFS status file their own returns and have responsibility for only their tax payments. Several financial and legal situations lend themselves to choosing this option. Legally, each spouse must sign the return when filing jointly. In cases where capacity or stubbornness arise, or divorce seems possible, MFS offers a benefit. The IRS can collect tax debts and penalties from both spouses if the agency detects any inaccuracies.

Financially, income disparities present a situation when filing jointly may serve as a disadvantage. Federal loan repayment plans allow MFS filers to have payments based solely on their income. Also, those filing MFS must claim the standard deduction. Thus, certain tax credits (e.g. child and dependent care, earned income tax credit) deductions do not apply. Dependents who reside primarily with one parent at different locations may benefit from MFS.

What rules apply to married-filing-separately in California?

The fact that California divides assets under the community property model significantly impacts benefits to MFS status. When filing a separate return, each spouse or registered dependent partner (RDP) must report one-half of the community property and all of their own separate income. These rules attribute half of the income to each filer regardless of the amount earned individually. Additional residency requirements apply that impact whether to select the MFS status.

Tax status may not rank as high on the priority ladder of marriage concerns for most couples. Changing circumstances, however, can require individuals to reassess their financial and legal relationships. Attorneys with a background in how taxes and divorce connect can offer guidance.


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