Income Differences and Investment Accounts
Certain tax-deferred or tax-exempt investment accounts, such as Roth IRAs, carry contribution limits for individuals whose adjusted gross income falls above specified limits. For Roth IRAs specifically, married individuals filing jointly are restricted by contribution limits if their income is over $166,00 per year, whereas married couples filing separately each have a limit of $105,000.
If one spouse earns significantly more money per year than the other, filing jointly at tax time can bump the one who earns less into the favorable income range for these investment accounts. In these cases, filing separately may allow the one who earns less to come in under the threshold.
Unreimbursed Medical Expenses
Non-reimbursed medical expenses are any health care-related payments that have not been covered by an insurance company or similar institution. Medical expenses can grow to become a significant liability for an individual; the IRS allows tax filers to deduct non-reimbursed medical expenses if they are higher than 7.5 percent your annual income.
Filing jointly can cause a spouse with non-reimbursed medial expenses to exceed these limitations by causing the expenses to be smaller as a percentage of total income. In these instances, filing separately may help the spouse with the expenses to increase the expenses ratio to annual income.
Miscellaneous and Business Deductions
Miscellaneous and personal business deductions can only be claimed if they exceed 2 percent of the filer's income. Examples of business deductions include a portion of home rent to cover a home office and qualified travel expenses. Examples of other miscellaneous expenses include union dues, charitable donations and tax-preparer fees.
Again, filing separately can grant you an advantage in this area by lowering your taxable income and raising your miscellaneous and business expenses as a percentage of your total income.
Uninsured Property Losses
Uninsured property losses work much the same way as non-reimbursed medical expenses for tax deduction purposes. The IRS allows individuals to deduct property loss expenses, such as roof damage not covered by insurance, as long as they exceed 10 percent of the filer's adjusted gross income. Just as with the other advantages, filing separately can help you to bring any property loss expenses over the 10 percent limit.