The Facts

• Married people do not have to file joint taxes. While married filing jointly may be the most obvious and often best choice, you have the option to select married filing separately, where you and your spouse each file separate tax returns. Both filing status options have their own advantages and disadvantages and although the IRS recommends choosing the option giving you the lowest tax, your personal situation also plays a role in making a good decision.
  
  

Rate Considerations

• If all you consider are the financial implications, filing joint taxes usually makes the most sense. As of 2011, if you have an annual taxable income of $80,000 and your spouse has an annual taxable income of $40,000, filing joint taxes results in a tax bill of $22,250 before applying any deductions or credits. If you file separately, however, your tax bill is $16,435 and your spouse will pay $6,125, bringing the total to $22,560, or an increase of $310 compared to filing jointly.
  
  

Deductions and Credits

• Filing taxes separately often reduces the number of available tax deductions and credits. For example, you cannot take a credit for child and dependent care, adoption expenses, the elderly or disabled credit and filing separately may affect your ability to deduct contributions to an IRA. In addition, education-related deductions and credits, including student loan interest deductions and the Hope and Lifetime Learning credit become unavailable to you and your spouse. Finally, the IRS reduces the amount you can deduct for any capital gains losses by 50 percent when you file taxes separately.
  
  

Extenuating Circumstances

• Significant out-of-pocket medical expenses can make all other considerations irrelevant and result in saving money by filing separately. In general, the higher your income, the less you can deduct and if annual out-of-pocket expenses are less than 7.5 percent of your income you cannot deduct them at all. For example, if you have an annual taxable income of $80,000 and your spouse has an annual taxable income of $40,000, and your spouse incurs out-of-pocket medical expenses of $15,000, together you can deduct $6,000 of these expenses. If you file separately, however, your spouse can deduct $12,000.
  
  

Considerations

• Tax laws change every year and because of this it is a good idea to consult a tax adviser or attorney before making filing status decisions. What makes good financial sense this year may not in years to come, so if you have questions an annual review of your filing status is the best way to ensure you do not pay more than necessary.