MFS Can Be A Bummer

January 27, 2011 at 11:22 pm (Personal Taxes)

The Married Filing Seperate tax status can be helpful to any married couple for two reasons:

1. You each want to be responsible for only your own tax.

2. You find that this status gives you better results than filing a joint return.

This is generally a desirable way to file for people that are still considered married at the end of the tax year, but are filing for divorce. However, most often especially if children are involved, it may be much more advantageous to both parties if they suck it up one last time and file a joint return. I will give the IRS list below since it can’t be made any simpler:

  • Your tax rate generally will be higher than it would be on a joint return.
  • Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.
  • You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer’s dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return).
  • You cannot take the earned income credit.
  • You cannot take the exclusion or credit for adoption expenses in most cases.
  • You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
  • You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.

If you lived with your spouse at any time during the tax year:

  • You cannot claim the credit for the elderly or the disabled.
  • You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
  • You cannot roll over amounts from a traditional IRA into a Roth IRA.

The following credits and deductions are reduced at income levels that are half of those for a joint return:

  • The child tax credit,
  • The retirement savings contributions credit,
  • Itemized deductions, and
  • The deduction for personal exemptions.
  • Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
  • If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
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