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George Saenz, the Bankrate.com Tax Talk columnistMarried filing separately not the way to go

Dear Tax Talk,
I am disabled and receive Social Security disability benefits. My wife works and is the main wage contributor. If we file separate tax returns, my Social Security is not taxable since it is the only income I have, but if we file a joint return, 70 percent of my benefits are taxable. My question is this: If I do not file a return or if we file separately, can my wife claim me as a dependent on her return or take an exemption for me?
-- Terry

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Dear Terry,
I don't think you're clear on how Social Security benefits are taxed, so I'll answer that first before we get to the exemption question. Benefits are taxable when one-half of your benefits plus all your other income (including tax-exempt interest and dividends) exceed a base amount. The base amount depends on your filing status.

For 2005 the base amounts are as follows:

  • $25,000 if you are single, head of household or qualifying widow(er),
  • $25,000 if you are married filing separately and lived apart from your spouse for all of 2005,
  • $32,000 if you are married filing jointly, or
  • $0 if you are married filing separately and lived with your spouse at any time during 2005.

So, if you lived with your wife in 2005, which it sounds like you did, you won't avoid tax on your benefits -- without meeting certain other thresholds -- by filing a separate return. To avoid tax on part of your benefits, your wife must not itemize her deductions on a separate return so that you are allowed one-half of the standard deduction that a married couple filing jointly would be entitled to claim. In 2005, this amount is $5,000. Hence, if your wife does not itemize, you can reduce your taxable benefits by $5,000. Depending on the amount of benefits you received, you might avoid tax. However, if you're married filing separately, you lived with your wife and your benefits exceeded $3,200 in 2005, you would be required to file a tax return according to Publication 501.

If your wife files a separate return, she can claim the exemption for you only if you had no gross income, are not filing a return and are not the dependent of another taxpayer. Hence, your wife would not be entitled to an exemption for you.

To ask a question on Tax Talk, go to the "Ask the Experts" page, and select "taxes" as the topic.

Bankrate.com's corrections policy -- Posted: Feb. 9, 2006
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