Tax Implications of Filing Jointly vs. Individually for Married Couples

Filing Joint Returns

There are many tax implications to filing a joint return with your spouse. Joint filers always qualify for the largest standard deduction and are eligible to claim two personal exemptions. However, these implications are only beneficial when one spouse doesn't earn enough income to warrant the filing of a tax return, and therefore, doesn't claim a personal exemption or standard deduction. On a joint return, however, it's irrelevant which spouse actually earns the income. Joint filers are also subject to lower rates of tax on a substantial portion of their joint taxable income and are eligible to exclude twice as much gain from the sale of a main home from the capital gains tax.

The benefit of filing a separate return from your spouse and using the married filing separately filing status is the elimination of your liability for your spouse's taxes. In contrast, joint filers are jointly liable for all tax debt regardless of which spouse earns the income. Some drawbacks to filing separately are that your income is subject to higher rates of tax and you are ineligible to claim many of the tax credits, such as the dependent care, earned income and adoption credits. If your spouse itemizes deductions, not only are you ineligible to itemize on your own return, but you can't claim the standard deduction either.

Under certain circumstances, you can file separately from your spouse using the head of household filing status. To qualify, you must be "considered unmarried" despite the fact you remain in a legal marriage. This requires that you lived separately from your spouse for the last six months of the tax year on an indefinite basis, you pay for more than half of the expense to maintain your home and you claim a dependency exemption for your child, stepchild or foster child who lives in your home for more than half the tax year. The tax implications of this status are lower rates of tax in comparison to the married filing separately status and the availability of a larger standard deduction.

The applicable tax rates for each filing status have the most significant impact on your tax liability. To illustrate, the 2011 tax brackets require a married filing separately filer to pay 10-percent tax on their initial $8,500 of taxable income with the excess subject to higher rates of tax. In contrast, head of household filers are subject to the 10-percent rate on their first $12,150 of taxable income and joint filers pay 10 percent on up to $17,000 of taxable income.