But… let your circumstances rather than your emotions be the judge of how to file.
First – how to save on the amount of tax you’ll pay. Remember that some expenses are deducted based on a percentage of income. Medical expenses, for instance, can only be claimed if they exceed 7.5% of your adjusted gross income. If the spouse with the least income also had a lot of medical expenses, it might make sense to file separately.
The same goes for business and investment expenses. The smaller the income, the more expenses you’re allowed to deduct.
Next – by filing separately you could avoid having your refund seized by the IRS for such items as child support or unpaid income taxes. Remember, when you file jointly, you are both subject to any seizures the IRS might make.
Worse, if your spouse has gotten in way over his or her head, and is looking at owing the IRS a large sum of money, you could find a lien placed on property you own separately – just because you filed jointly. This, of course, will show up as an entry on your credit report.
Newly married couples who have a “past financial life” should take everything into consideration before making the decision. Figure your tax debt both ways, and then consider excess tax obligations or legal entanglements that either of you might have.
While filing together may seem like presenting a united front, it could be beneficial to both of you to keep one spouse’s money and credit in good shape, no matter what is happening with the other spouse.
For instance, you may plan to sell one or more homes and purchase a new home that is yours together. You might be prevented from enjoying the equity you’ve built in your home if your spouse has a tax debt and the IRS has placed a lien on both homes. If that happens, they’ll take it – along with any cash you’ve put away in the bank.
So – you’ll be out the equity, out the cash, AND have a lowered credit score because of the lien.
If you filed separately, you would still have the equity in your home, still have the cash in your (separate) bank account, and still have the credit score to allow you to purchase that home. You can always do a quit claim deed later and add your spouse to the title AFTER all the problems are settled.