A special tax return is triggered if you give a gift and exceed the gift tax limit.
What is married filing separately?
Married filing separately is a filing status that married couples may use to file their taxes.
Married couples have two ways to choose from when they file their taxes — married filing jointly and married filing separately. In most cases, it makes sense to choose the status that minimizes the couple’s income tax obligation.
Married filing separately is a filing status available to all couples. Despite the name, couples do not have to be separated or living apart to use the status. However, for most couples, choosing married filing separately increases their income tax obligation. There are a few instances where it is financially wise to opt for married filing separately:
- One spouse has back tax debt.
- One or both individuals has a large amount of itemized deductions.
- There is a large disparity between each person’s income.
Couples should run the numbers to see what filing status will yield the largest refund, especially if they have a complex tax return.
The married filing separately status may prevent the couple from qualifying for certain tax deductions and tax credits. Both people must calculate their deduction in the same way, meaning that if one person itemizes, the other must as well.
If one spouse suspects his or her partner is guilty of tax fraud, he or she can file as married filing separately to help minimize potential liability. Should one spouse refuse to file taxes, his or her partner can elect to file as married filing separately to file taxes without the partner’s cooperation.
Married filing separately example
If you’re married, it is important to check each year which filing status offers the largest tax refund. For example, assume that you are newly married. Your partner owes back taxes of $4,000. You don’t want to be held liable for this debt or have your refund go toward your partner’s back taxes, so you opt for the married filing separately status.
Ready to file your taxes? Estimate your potential tax refund.