Officially ending a marriage simplifies taxes

Every year during tax season I come across people who are still legally married even though they haven’t had contact with their spouse for years. They cannot file a tax return as “Single.” If they aren’t divorced or legally separated, that leaves them stuck with a “Married Filing Separately” (MFS) tax status.

There are several disadvantages to using the MFS filing status, including:

  • You are not eligible for Earned Income Credit.
  • You can not deduct student loan interest paid.
  • You do not qualify for Education Credits (American Opportunity or Lifetime Learning Credit) related to college expenses.
  • You must know and list your spouse’s name and social security number on your tax form; if you cannot, then your tax return will need to sent in by mail instead of submitting electronically.
  • If one spouse itemizes deductions, the other spouse must also itemize deductions.
  • On the Iowa return, you must report approximately how much income your spouse has; if you cannot, then your Iowa return will need to be sent in by mail.

There is an exception – one group of people who are split from their spouse but do not have to file MFS. These are people who are paying the cost to keep up a home for someone else (typically a parent who is keeping up a home for his/her children).  These individuals can be “considered unmarried” if they have not lived with their spouse at any time during the last six months of the year; if so they qualify for “Head of Household” filing status, which allows them to receive the Earned Income Credit and other tax benefits. However, when the children are grown and the taxpayer can no longer claim “Head of Household,” then they must use Married Filing Separately as their tax status.

“What’s the point of all this?” you may be asking.  I have two reasons for covering this topic today, as this long COVID-extended tax season finally approaches its end.

  • First, I’m tired of breaking bad news to people – the news that their tax return may be difficult to file and they can’t get some of the tax credits they might want.  
  • Second, to put forth the suggestion indicated in the title: If the marriage is over, maybe it would be smart to make that official. If you have reasons to avoid divorce, consider a legal separation if possible. Taking that step would make tax filing easier for both parties.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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