Is there a difference between filing single and filing separate (married)?
Filing Single Vs. Married Filing Separate
The key difference between the Married Filing Separately verses the Filing Single status is if you are legally married on the last day of the tax year (December 31st for most people). No other day during the year matters for your tax filing status.
If you are married on Dec 31
If you are legally married on December 31st, you cannot claim the Single status. You do have an option to potentially claim the Married Filing Jointly, Married Filing Separately, or Head of Household status.
If you aren’t married on Dec 31
Similarly, if you are legally not married on December 31st, you cannot claim the Married Filing Jointly or Married Filing Separately status. But you might be able to claim the Head of Household status in addition to the option to file Single.
Choosing Between Your Options
Each of these filing options carries with it specific advantages and disadvantages. To know what is right for you, you will want to ask professionals who deal with these issues, such as a CPA or financial adviser. If you are going through a divorce or other legal issues, you will also want to consult your attorney.
Be Careful When Choosing Married Filing Separately
Generally, the Married Filing Separately status is the least desirable status, and carries with it an increased tax burden through lower tax bracket income ranges and the potential losses of many deductions and tax credits.
Advantages of Married Filing Separately
There are advantages to filing separately related to legal protections, divorce, qualifying for special programs, and advanced tax or financial planning strategies. If your attorney, CPA, or financial adviser is recommending the Married Filing Separately status, ask them to explain why they are making the recommendation and how it benefits you. They should be able to explain it clearly to you in a way you understand how it benefits you. If they can't, seek a second opinion from a similarly qualified professional to help you make your decision.
Making the Choice
The best way to decide which option is for you is to determine all of the filing statuses you could file under, and then prepare test returns multiple ways based on all of your options. Whichever return or set of returns (if you are married) offers the lowest overall tax liability may be the one you should go with. I say “may be“ because there are also legal and other consequences to filing under different tax statuses which may override the dollar savings in tax liability.
Realize this is a significant amount of work and the chances for errors increases both with the number of returns you test and with the complexities of your finances. This is especially true when considering more advanced tax planning, financial planning, or legal strategies.
Get Professional Help
While a CPA might cost a few hundred dollars, the wrong choice of filing status can mean thousands of dollars in additional taxes. As with most things in personal finance, the advice of professionals often pays for their fees many times over.
Joshua Escalante Troesh is a tenured professor of Business at El Camino College and the founder of Purposeful Finance. He is also the owner of Purposeful Strategic Partners, a fiduciary and fee-only financial planning firm and a Registered Investment Advisor. He can be reached for comment at firstname.lastname@example.org