The filing status you choose when filing your taxes can have a significant impact on how much you pay in taxes each year. There are five different filing statuses to choose from – single, married filing jointly, married filing separately, head of household, and qualifying widow(er). Each status has different income thresholds, standard deductions, and tax rates associated with it. So which one typically results in the highest tax bill? Generally speaking, married taxpayers filing separately tend to pay more in taxes than those using any other filing status. Let’s take a closer look at each of the five options to understand why this is the case.
Overview of the Five Filing Statuses
Single
Filing as single means you are unmarried and claim no dependents on your tax return. This status has the lowest standard deduction ($12,950 for 2022 taxes) and narrowest tax brackets. Your taxable income is subject to rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% under the 2022 tax brackets. While taxes can add up quickly in the higher brackets, having wider brackets in the lower tax rates can benefit single filers. Your income is taxed at lower rates before reaching those top brackets.
Married Filing Jointly
Married couples have the option to file their taxes together with this status. It doubles the standard deduction to $25,900 for 2022 and doubles the width of each tax bracket. Income is aggregated and your combined taxable income is subject to the same rates as the single brackets referenced above. Filing jointly generally results in a lower tax bill than if each spouse filed separately. Doubling the standard deduction and tax brackets allows more income to be taxed at lower rates.
Married Filing Separately
Sometimes married couples choose to file separate tax returns. This results in each spouse claiming the standard single deduction ($12,950 for 2022) and using the narrow single tax bracket thresholds. While income is not combined like with joint returns, certain deductions and credits are limited or eliminated when filing separately. Income is taxed at lower rates in narrower brackets, often resulting in more income taxed at higher rates. For these reasons, married filing separately typically results in a higher total tax bill than filing jointly.
Head of Household
Unmarried taxpayers with dependents can file as head of household. This status has a higher standard deduction than single or married filing separately ($19,400 for 2022). The tax brackets are also wider than the single brackets. Heads of household reach the top 37% bracket at $539,900 of taxable income compared to $539,050 for single filers. The wider brackets result in more income taxed at the lower rates. Overall taxes are typically lower than if the taxpayer filed as single.
Qualifying Widow(er)
A qualifying widow or widower is someone whose spouse died in the last two tax years and has a dependent child living with them. This status allows the taxpayer to utilize the joint standard deduction ($25,900 for 2022) and tax brackets for two years following the year their spouse passed away. Taxes are typically lower with this status versus filing as a single taxpayer for those two years.
Reasons Married Filing Separately Takes Out the Most Taxes
Now that we’ve reviewed the five filing statuses, let’s discuss why married filing separately typically results in the highest tax payment. There are a few key reasons for this:
Lower Standard Deduction
Claiming the single standard deduction vs. the joint deduction makes a big difference. For example, a married couple with $50,000 in total itemized deductions in 2022 would have no tax benefit from itemizing if they filed separately since their separate standard deductions of $12,950 each exceeds $50,000/2=$25,000 itemized. Filing jointly allows them to utilize the full $50,000 in itemized deductions against their income above the $25,900 joint standard deduction.
Narrower Tax Brackets
Just like with the standard deduction, narrower tax brackets apply when filing separately. This can result in more income taxed at higher rates. For example, a married couple has $120,000 in taxable income for 2022. Filing jointly, they have $17,950 taxed at 10%, $61,975 at 12%, and the remainder at higher rates. Filing separately with $60,000 each, they have $12,950 taxed at 10%, $47,050 at 12%, and the rest at 22% or higher. More income gets pushed into those higher brackets when filing separately.
Inability to Take Certain Credits
Some tax credits are limited or eliminated when married couples file separately. For example, the Child Tax Credit and Earned Income Credit cannot be claimed at all by married taxpayers filing separately. Education credits like the Lifetime Learning Credit are also not available. This contributes to higher taxes owed.
Combined Income Limitations
Certain deductions and credits phase out at higher income levels. While filing separately calculates these limitations individually, the IRS still combines your incomes to determine phase out ranges. So you can be phased out of tax benefits due to combined income despite filing separately.
Ineligibility for Certain Deductions
Some deductions cannot be claimed at all on separate married returns. For example, IRA contributions can only be deducted by taxpayers filing as single or head of household if neither spouse is covered by a retirement plan at work. But married joint filers get at least a partial deduction as long as one spouse isn’t covered.
Higher Effective Tax Rates on Social Security
Up to 85% of Social Security benefits are taxed for those with provisional incomes over $44,000 ($34,000 if filing separately). Since the threshold is lower when filing separately but combined income still applies, more Social Security income can get taxed.
Tax Scenarios Comparing Filing Statuses
Let’s look at some examples to see how the tax bill often shakes out highest for married filing separately filers:
Married Couple With No Kids
John and Jane have $150,000 in taxable income and $22,000 in itemized deductions for 2022. If they file jointly, they have a standard deduction of $25,900 and taxable income of $125,100. This results in a tax bill of $18,870.
If they file separately with $75,000 taxable income each, they would each take the $12,950 standard deduction. Their taxable incomes would be $62,050, and their combined tax bill would be $21,056.
Married Couple With 2 Kids
Jake and Julie have $120,000 in taxable income and $18,000 in itemized deductions. They have two young children together. If they file jointly, they have $101,100 in taxable income after the $25,900 standard deduction and exemptions for both kids. Their tax is $11,449.
Filing separately, each spouse has $54,000 in taxable income after the $12,950 standard deduction and one exemption. Their combined tax is $13,635. They also lose out on $2,000 in Child Tax Credits by filing separately.
Single Parent Household
Sara is unmarried with $60,000 in taxable income and two children. Filing as head of household, she has $38,100 in taxable income after her $19,400 standard deduction and two exemptions. Her tax is just $3,528.
If she had to file as single, she would have $49,050 in taxable income after the $12,950 standard deduction and exemptions. Her tax would be $5,628, over $2,000 more!
When Married Filing Separately Makes Sense
Despite typically resulting in a higher tax bill, there are some cases when it makes sense for married couples to file separately.
One Spouse Has High Medical Expenses
Since medical expenses must exceed 7.5% of AGI before being deductible in 2022, having a lower AGI by filing separately can allow the spouse with high expenses to qualify for this deduction.
One Spouse Has Significant Miscellaneous Deductions
Miscellaneous deductions subject to the 2% floor are limited when a married couple files jointly. Filing separately may allow one spouse to utilize more of these deductions to offset income.
One Spouse Has Major Capital Losses
Capital losses are limited to $3,000 annually to offset ordinary income when filing jointly. Filing separately allows each spouse their own separate $3,000 capital loss deduction.
One Spouse Owes Back Taxes
Joint filers are jointly and severally liable for any tax due. Filing separately avoids making the spouse without a balance liable for the other’s tax debt.
One Spouse Has Income-Based Student Loan Payments
Since income-driven repayment plans for Federal student loans look at combined income when married filing jointly, filing separately may qualify the spouse with loans for lower payments based on only their income.
Divorce Is Imminent
When divorce is on the horizon, married filing separately returns may simplify dividing tax liabilities and refunds equitably between the spouses.
Strategies to Reduce Taxes When Filing Separately
If you determine that filing separately is the right move due to your specific tax situation, here are some tips to try to reduce your tax bill:
Adjust Withholding
Have less tax withheld from the higher earning spouse’s paycheck to compensate for narrower brackets when filing separately.
Max Out Retirement Contributions
Fund Traditional IRAs and 401(k)s up to the maximum to lower AGI and qualify each spouse for deductions.
Split Dependents Strategically
Allocate dependents to the spouse in the lower tax bracket to maximize credits available.
Take Advantage of Separate Property
Have investment and rental income taxed to the spouse who owns the property separately to utilize lower capital gains rates.
Watch Out for AMT
Higher AMT exposure applies for separately filing spouses, so implement strategies to avoid the extra tax.
The Impact of Filing Status on Tax Liability
Filing status determines tax rates, deductions, exemptions, and eligibility for credits. Married filing separately almost always results in the highest total tax bill due to its disadvantages: narrow brackets, lower standard deduction, and limitations on tax benefits. Exceptions exist when there are large disparities in income, expenses, or tax situations between spouses. But the joint return is usually the tax-savvy choice for married couples.
Conclusion
The filing status you choose impacts your tax situation in significant ways. Married taxpayers who file separate returns typically pay the most in total taxes each year. This results from lower standard deductions, compressed tax brackets, and loss of tax credit eligibility. While there are some cases where filing separately makes sense due to disparities between spouses, most married couples will pay less filing jointly. Performing a side-by-side comparison and understanding the limitations of each status allows taxpayers to make the optimal decision based on their personal financial and tax circumstances.
