Wealthy clients might find other advantages to the MFS status by shifting itemized deductions to the spouse with the higher income or by claiming dependents against the lower-income spouse for child tax credits, Kadrlik said.
Certain tax credits may also be unavailable to MFS taxpayers. Spouses filing separately are limited to a $5,000 deduction for state and local taxes, for instance, while a couple filing jointly can now take a $10,000 deduction. MFS also offers few advantages in terms of medical expenses, Brennan added.
These, advisors said, are other disadvantages of filing MFS:
• If your high-net-worth client’s spouse itemizes deductions, your client can’t claim the standard deduction.
• Your client’s standard deduction will be half of what it would be on a joint return, and your client will generally have a higher tax rate than on a joint return.
• Your high-net-worth client’s alternative minimum tax exemption amount will also be half of that on a joint return, as will your client’s capital-loss deduction limit.