Itemized Deductions and Dependents

If both spouses have similar income levels but one spouse has a much higher amount of deductible expenses, it may be advantageous to file separately.

For example, medical expenses are deductible only to the extent that they exceed 7.5 percent of the taxpayer's adjusted gross income (AGI). If one spouse had the majority of the family medical expenses, the 7.5 percent threshold may be easy to overcome when only that spouse's income is counted. A similar situation exists for miscellaneous itemized deductions, including employee business expenses (2 percent of AGI threshold) and nonbusiness casualty losses (10 percent of AGI threshold).

However, keep in mind that if one spouse itemizes deductions, the other will have to itemize as well, even if the second spouse winds up with few or no allowable deductions. This means the difference must exceed the lost standard deduction for the strategy to make sense. If you're a high-income earner, it may also be important to consider how separate filing alters the impact of the limitation on itemized deductions faced by high-income taxpayers.

If you have dependents and file separately, you must divide their exemptions between yourself and your spouse, but no single exemption can be split.

Save Money If you have numerous dependents and one spouse claims them all, you might come out ahead. Just make sure that the spouse who claims the exemptions can meet all the tests for claiming each dependent ; generally this would require that the spouse claiming the exemptions earned enough money to provide more than one-half of the dependents' support.