Mods - Please Delete

[Cadman]

Thanks everyone. Will delete this thread.

[marty998]

There was another thread about this very scenario asked a couple of weeks earlier (don't ask me to find it though!)

It could work, but you'll only know for sure if you run the numbers on both outcomes.

[skuzuker28]

Yep, only way to know for sure is to run the return both ways.

Generally, MFJ is the most tax advantageous.  This is ESPECIALLY the case when there is an income disparity between the spouses.  Remember, MFS tax brackets are half the married (usually equal to the Single rates).  So while she would be in the 10%, your separate return might have income in the 24% that would otherwise be in the 22% bracket on a MFJ return.  MFS also removes eligibility for certain tax benefits.

[Cadman]

Remember, MFS tax brackets are half the married (usually equal to the Single rates). 

That's an extremely good point and one I overlooked. It seems that alone would wipe out any other 'advantage'. Thanks for the feedback.

[El Jacinto]

The only time that MFS makes sense in your case is if she has the low income and very high itemized deductions. For example, if she made 30k but had 20k in medical expenses. The only portion of medical expenses that are deductible are those that exceed 10% of income, so she only loses out on 3k of the expenses, whereas filing jointly with your high income, y'all might lose out on much more.

The HSA and 401(k) contributions are above-the-line adjustments, not below-the-line deductions, so your high income does not reduce them. You can still try the return both ways as some have suggested, but you'll be better off MFJ with the facts presented.

[Sibley]

The only time that MFS makes sense in your case is if she has the low income and very high itemized deductions. For example, if she made 30k but had 20k in medical expenses. The only portion of medical expenses that are deductible are those that exceed 10% of income, so she only loses out on 3k of the expenses, whereas filing jointly with your high income, y'all might lose out on much more.

The HSA and 401(k) contributions are above-the-line adjustments, not below-the-line deductions, so your high income does not reduce them. You can still try the return both ways as some have suggested, but you'll be better off MFJ with the facts presented.

There are other situations where MFS is advantageous. You have to run the numbers both ways to be sure.

[terran]

From the sounds of things your situation is actually the one where MFJ is usually most advantageous. In a high/low earning couple the low earner is basically "giving" some of their relatively low bracket to the high earner, so as a unit they are taxed less than they would be filing alone. I haven't looked too closely, but I suspect MFS is probably generally worse than filing single, which (at least in your high/low earning situation) would likely be worse than MFJ.

[Cadman]

I was hoping such a scenario would allow her to open a tIRA and take the contribution deduction, but I gather the phaseout is based on combined income, even if MFS.

[DS]

Nice little easy to understand article from Betterment:

https://www.betterment.com/resources/married-filing-separately/