Married Filing Separately: Pros, Cons, and When It Makes Sense

For most couples, filing a joint tax return provides the biggest tax benefit. But that isn’t always the case. In certain situations, filing as married filing separately (MFS) may be the smarter move — especially for high earners, California residents, or couples with unique financial circumstances.

At Velin & Associates, Inc., we often help clients like YouTubers, Shopify store owners, dentists, doctors, and creative professionals evaluate whether filing separately could save them money or protect them from financial risk.

Here’s what you need to know about the advantages and disadvantages of filing MFS, with real-life examples to guide you.

✅ Advantages of Filing Married Filing Separately

1. Protects You From Your Spouse’s Tax Issues

When you file jointly, both spouses are fully responsible for the accuracy of the return and any taxes owed. If one spouse has unpaid tax debt, child support, or defaulted student loans, the IRS can seize the joint refund. Filing separately protects your refund.

💡 Example: A dentist in Los Angeles is up to date on taxes, but their spouse owes significant back taxes from before the marriage. By filing separately, the dentist ensures their own refund isn’t applied to those old debts.

2. Avoids Liability for Questionable Income

If you’re worried about your spouse underreporting income or claiming questionable deductions, filing separately limits your responsibility. Each spouse is only liable for their own return.

💡 Example: A TikToker reports all income honestly, but their spouse runs an e-commerce business and may not have reported all Shopify revenue. Filing separately keeps the TikToker from being dragged into an audit for their spouse’s mistakes.

3. Maximizes Certain Deductions

Sometimes, filing separately allows one spouse to benefit from deductions that would otherwise be phased out by high adjusted gross income (AGI).

💡 Example: A doctor has high out-of-pocket medical expenses. Filing separately may allow them to deduct more of those expenses since the threshold is based on their AGI alone, not the couple’s combined income.

4. State-Specific Benefits (Especially in California)

California has unique rules that sometimes make filing separately beneficial.

• Millionaire’s Tax: California imposes a 1% mental health surcharge on income over $1 million. Filing jointly could push a couple over the threshold, while filing separately may keep each spouse under it.
• Business Income Exclusion: California allows a $1 million exclusion per return when calculating tentative minimum tax (TMT). Couples who file separately may qualify for two $1 million exclusions, potentially reducing their AMT liability.

💡 Example: A married couple running a dental practice in California earns $1.5 million combined. Filing jointly exposes them to the mental health surcharge. Filing separately may help avoid it.

5. Divorce or Separation Situations

Couples in the process of divorce often file separately to avoid financial entanglements. This keeps each spouse’s tax situation distinct and reduces complications later.

6. Student Loan Repayment Planning

For spouses on income-driven repayment (IDR) plans for student loans, filing separately may lower monthly payments since only the borrower’s income is counted.

💡 Example: A YouTuber has $200,000 in student loans. Their spouse earns $400,000 as a surgeon. Filing separately may lower the YouTuber’s repayment amount significantly.

❌ Disadvantages of Filing Married Filing Separately

While there are benefits, there are also significant drawbacks:

• Higher Tax Rates: MFS filers generally face higher tax brackets than joint filers.
• Loss of Key Credits: Filing separately disqualifies you from:
  • Earned Income Credit
  • Education Credits
  • Dependent Care Credit (except in very limited cases)
  • Premium Tax Credit for health insurance
• Reduced Deductions: MFS filers cannot claim:
  • Student loan interest deduction
  • Certain retirement account contributions
  • Deductions for qualified tips and overtime
• Alternative Minimum Tax (AMT): MFS filers have a lower threshold for AMT, which can increase overall liability.

💡 Example: A Shopify seller and their spouse file separately to protect against tax liability. However, they lose the Child Tax Credit and end up paying more in combined taxes than if they had filed jointly.

The Tax Cuts and Jobs Act (TCJA) Impact

The TCJA suspended AGI limits on itemized deductions from 2018–2025. Starting in 2026, high earners in the 37% tax bracket will once again be subject to AGI limits. At that point, filing separately could allow one spouse to preserve more deductions.

Bottom Line

For most couples, married filing jointly remains the most tax-efficient choice. But in certain cases — especially if one spouse has debt, high deductions, or the couple lives in California — filing separately can offer protection and savings.

The trade-off is real: you may save in some areas but lose credits and face higher overall rates in others.

How Velin & Associates Can Help

At Velin & Associates, Inc., we specialize in helping YouTubers, Shopify store owners, TikTokers, Amazon sellers, doctors, dentists, and other professionals make the smartest filing choices.

We don’t just fill out forms — we:

• Compare your tax liability under both joint and separate filings
• Analyze California-specific impacts (like millionaire’s tax and AMT exclusions)
• Help you plan around student loans, deductions, and credits
• Protect your refund and limit liability in complex situations

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org