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A married couple that are both receiving Social Security will lose the low income advantage to reduce Social Security taxes if they file married filing separately. The designation creates an 85% tax on most of their Social security income. Once your income exceeds the point of making SS 85% taxable, there may be advantages to filing separate returns, but not when income is low.
What are some reasons to file separately? I can think of two: couple is separated or going for student loan forgiveness.
If a couples relationship status is separated a review of IRS Pub (2024) 504 may be a useful read.
https://www.irs.gov/publications/p504#en_US_2024_publink1000175821
When I was a tax preparer who dealt directly with clients wanting to prepare and file individual returns using married filing separate filing status who had adverse interests we, as preparers, required both spouses to formally agree allow us to do so as required by circular 230 section 10.29 titled Conflicting interests.
https://www.irs.gov/pub/irs-pdf/pcir230.pdf
As both spouses are liable for current year taxes when a married filing joint return is filed one spouse may decide not to join the other in filing if the other spouse is perceived to want to be taking a questionable, inappropriate or incorrect position on a return.
Couples with marital difficulties may also refuse joint status filing out of spite for non-tax reasons.
Also, as any overpayment shown on a joint return may be used to pay the past-due amount of your spouse’s debts, couples will sometimes choose filing MFJ status for separate tax debts.
You cite 2 good reasons. Also, for 2 wage earner couples, and depending on your state, MFS sometimes lowers total tax liability. Professional tax software easily does the math. For do it yourself types, you may have to prepare 3 returns manually, both federal and state, to decide what is best. And don’t forget to consider the Medicare surcharge if you use Medicare.
The TurboTax What-If worksheet can help with this.
I have not used TT in many years. At that time, it wouldn’t split both the federal and state taxes. Typically MFS results in similar or slightly higher federal tax, but much less tax for the state. So only looking at federal tax won’t tell you the whole story. Again, this varies state to state and with the relative earning of each spouse.
“The designation creates an 85% tax on most …”
It doesn’t create any tax does it? It makes 85% of benefit taxable income as you said.
Some people may actually pay little of no tax in practice.
Put 20,000 pension and 40,000 Social Security into your tax software as married filing jointly, then change the return to married filing separately and see the difference in Social Security taxation. It keeps tax payers from taking advantage of the higher single brackets used to determine when SS becomes taxable. 25,000 x 2 versus the 32,000 for married filing jointly.
Okay, but all I said was there is not an 85% tax on SS, but 85% as taxable so the actual tax varies based on other factors.
You’re correct, not 85% tax but 85% of SS taxed.