January 22nd, 2023 marks the start of tax season and also the start of "divorce season." For those considering divorce, it is important to understand the implications it may have on tax filings. One decision that must be made is whether to file "Married Filing Jointly" or "Married Filing Separately."
Filing "Married Filing Separately" may seem like a cleaner break financially, but it comes with drawbacks. One disadvantage is the loss of deductions. When filing separately, there are several deductions that can only be taken as an individual once legally divorced. For example, the earned income credit and child and dependent care credit cannot be taken. Additionally, the standard deduction is also affected. The IRS requires the same deduction methodology, whether itemized or standard, to be taken on both spouses' tax returns. This can be disadvantageous for the spouse who does not pay the mortgage or has a lower wage.
On the other hand, there are also advantages to filing "Married Filing Separately." One advantage is that you will not be held liable for taxes that your spouse owes during the current year. Additionally, your tax refund would not be garnished if your spouse owed back taxes, child support, or unpaid federal debt. Additionally, it allows for the suspension of passive activity losses related to real estate. Furthermore, if the spouses decide to reconcile, they have up to three years to refile their tax returns as "Married Filing Jointly."
In conclusion, filing "Married Filing Separately" may be a cleaner break financially, but it does come with drawbacks. Both spouses should be aware of the potential disadvantages and advantages before making a decision
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