Tax Time: What You Can and Can't Deduct

A Separate Peace

There are few reasons for married couples to file separately, but itemized deductions could warrant such a move. If you and your spouse have a significant amount of medical expenses or miscellaneous deductions, but they don't quite exceed the requisite percentage of your joint AGI, consider filing separately.

Filing separately essentially means that you and your spouse file separate returns, reporting only your own income. (The tax brackets for those who are married but filing separately are exactly half of the brackets for joint filers.) Because each of you will have a lower adjusted gross income, reaching that 7.5% (or 2%) threshold will be easier. And the tax code allows the spouse with the lower AGI to deduct all the medical expenses for the other spouse, as well as any dependents.

There are a few caveats, though. For one, when filing separately, both spouses must either claim the standard deduction or both must itemize -- and so it still might work out better if you file jointly; you'll just have to do it both ways and see. Also, some tax credits -- such as the $1,500 Hope credit or the $1,000 Lifetime Learning credit (which can be used to defray higher education expenses), as well as the earned income tax credit (a credit aimed at the working poor) -- cannot be claimed by married couples filing separately. You must file jointly to be eligible.

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