Why would a married couple choose to file Married Filing Separately?

Answer 1

The only reason I could possibly come up with would be spousal debt. The spouse without debt would want the entire refund they are allowed without being penalized for the debts of their mate. The IRS and State Government WILL put a Lien on any refund for outstanding federal or state debts. I even heard about a state in the Midwest that did it for parking tickets. I don't recall the state.

But if you do have a spouse with passed debt, child support, student loans, things like that. You can still get the entire refund due you based on your earnings and with-holdings by filing a form 8679. http://www.irs.gov/pub/irs-pdf/f8379.pdf

Will take a bit longer though. And if your state has an income tax they may have different rules.

Answer 2

Occasionally, it's better financially. This pretty much only happens if one has large medical expenses, or unreimbursed employee business expenses, that are limited to taking an amount over some percent of AGI. Even then, it often does not end up with less overall taxes paid, but it can depending on amounts.

Sometimes people just want to keep their finances totally separate, so file separately.

Answer 3

Since there're very few mathematical reasons why anymore, it's usally because one has a debt to the IRS or student loans or something like that and the other partner doesn't wnat his/her half of the refund to pay the debt of the spouse.

Yeah, get married, but don't trust your spouse....sounds like a relationship on shaky ground to start.

Answer 4

Whereas many of the previous answers are correct by saying it typically isn't worthwhile another reason not mentioned is when one spouse is asset rich but income poor. The spouse has a large amount of portfolio management fees whilst the other has ordinary income. Typically MFS comes into play for AMT reasons and can also affect one's ability to take a deduction for investment interest in the scenario I suggested.