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Married couples can file their federal income taxes jointly or separately. When you file a joint tax return, both you and your spouse report your income, deductions, credits, and exemptions on the same tax return. This also means that you are both responsible for each other's tax liability. Even if you reported no income on the return, you will be responsible for any tax, penalties, or interest on the return. By filing jointly, each spouse is 100% liable for any mistakes or unreported income, regardless of who had the income.
As an incentive for couples to file joint tax returns, the IRS offers tax breaks to those who file together. Joint filers can take one of the largest standard deductions each year and deduct a significant amount of their income immediately. Couples who file jointly may also qualify for multiple tax credits like the Earned Income Tax Credit or the Child and Dependent Care Tax Credit.
When you file a separate tax return, you and your spouse report your income, deductions, credits, and exemptions on separate tax returns. Filing separately means that you are only responsible for your own individual tax liability, and will not be responsible for any tax, penalties, or interest from your spouse's tax return.
Couples who file separately receive few tax considerations, and the standard deduction for separate filers is much less than the deduction for joint filers. In some situations, filing separately could help you save on your tax return—if you or your spouse has a large amount of out-of-pocket medical expenses to claim, filing separate returns may allow you to claim more of your available medical deductions.
While 95% of married couples file joint tax returns, filing jointly may not be the best filing status for every couple. If you or your spouse has any current or past legal, tax, or credit problems, separate filings can help you avoid headaches at tax time. Filing separate returns also helps keep your property and assets separate, which is a good idea if one spouse has many more assets than the other, or if divorce is a possibility in the near future. Consider the pros and cons of each status, and decide if joint or separate returns are better for you and your spouse.