Can You be Taxed on Money Your Spouse Earns While You are Separated?
When you are married, you and your spouse might file joint tax returns. This means that you will jointly pay taxes on the income and gains that you and your spouse both earned during the previous year. Even if you earned significantly less income than your spouse – or none at all if you stay home to care for your children and household – your spouse’s income might put you in a higher tax bracket and result in significant liability.
Once you are divorced, you will no longer be eligible to file for joint taxes. However, what happens when you are in the limbo of separation? If you are separated but not yet divorced, will you be liable for taxes on what your spouse earns?
Your Filing Status
If you are living separately but do not have a legal separation decree from the court, the Internal Revenue Service considers you to be married. If you obtain a separation decree by December 31 of the tax year, you can file separate returns, and you may claim that you are “single” or “head of household” for tax purposes.
However, if you do not have a separation decree, you will need to determine whether to file as:
- Married filing jointly
- Married filing separately
How you decide to file will depend on several factors unique to your situation.
Married spouses who file jointly often save significantly on their tax liability, since they have a greater standard deduction than married spouses filing separately. While you might save on your tax bill, there are some risks to filing jointly, especially if you and your spouse are estranged or adversarial. Importantly, if your spouse refuses to pay the taxes owed, you will be responsible for doing so. If the liability mostly stems from your spouse’s income, you might be able to file a Form 8857 Request for Innocent Spouse Relief, though doing so does not guarantee the IRS will accept it.
If you file separate returns, you and your spouse might each owe higher taxes on your income than on a joint return. However, the IRS will not hold you liable for your spouse’s tax liability. This can be beneficial if you earn substantially less than your spouse, as you might be taxed at a lower rate. There are many variables involved but obtaining a legal separation can allow you to file as single instead of “married filing separately.” Discuss whether a separation decree is right in your situation.
Consult with a Brandon Divorce and Separation Lawyer Today
Taxes are an important consideration during separation and divorce, as are many other financial aspects of this complicated situation. The law firm of Carman, Bevington & Finegan knows how to advise clients on such complex matters during the divorce process, and we work to ensure you are in the best financial position for your post-divorce life. Call 813-654-3444 or contact us online to discuss the many ways we can help during this difficult process.