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Both credits are phased out for higher income taxpayers. However, for those filing MFS, no credit is allowed at all.
Series EE or I Bonds – An individual who pays qualified higher education expenses with redemption proceeds from Series EE or I bonds issued after 1989 can potentially exclude the bonds’ interest from their income. However, no exclusion is available to a taxpayer using the MFS filing status.
Higher Education Interest – An “above-the-line” deduction (i.e., a deduction from AGI) is allowed for interest payments due and paid on any “qualified student loan,” regardless of when a taxpayer first incurred the loan. The maximum deduction per year is $2,500. This is a per-return limit, not a per-student limit. However, MFS filers cannot deduct any amount of higher education interest.
Standard Deduction – Married taxpayers filing jointly benefit from a 2021 standard deduction of $25,100, while the standard deduction for those filing as MFS is $12,550 (half of $25,100). However, if either spouse filing MFS itemizes their deductions, the standard deduction for the other spouse becomes zero, which forces that spouse to also itemize their deductions even if less than $12,550. Exception: Where a married individual qualifies to file as head of household as discussed at the beginning of this article, that spouse can take the standard deduction even if the other spouse itemizes.
Filing Requirements – For years 2018-2025, an individual is required to file a federal return if their gross income exceeds their standard deduction amount. For MFJ couples, the standard deduction for 2021 is $25,100, but taxpayers filing as MFS are required to file a return if their gross income is $5 or more.
Medicare Premiums – For those who qualify for Medicare, the premiums are based upon a taxpayer’s modified adjusted gross income (MAGI) and filing status from the tax return two years prior. As the Medicare chart for 2021 shown below illustrates, the rates for individuals filing MFS are substantially higher than for other Medicare participants.
MONTHLY MEDICARE B PREMIUMS
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FILING STATUS | MAGI from 2 Years Prior (2019) | 2021 PREMIUM |
Married Filing Jointly (MFJ) | $176,000 or less | $148.50 |
- | $176,001 – $222,000 | $207.90 |
- | $222,001 – $276,000 | $297.00 |
- | $276,001 – $330,000 | $386.10 |
- | $330,001– $749,999 | $475.20 |
- | $750,000 and Above | $504.90 |
Married Filing Separately (MFS) (Lived together) | $88,000 or less | $148.50 |
- | $88,001 – $412,000 | $475.20 |
- | $412,001 and Above | $504.90 |
Married Filing Separately (MFS) (Lived apart the entire year) |
$88,000 or less | $148.50 |
- | $88,001 – $111,000 | $207.90 |
- | $111,001 – $138,000 | $297.00 |
- | $138,001 – $165,000 | $386.10 |
- | $165,001 – $499,999 | $475.20 |
- | $500,000 and Above | $504.90 |
TABLE #1 – Married Individuals Filing Joint Returns and Surviving Spouses
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If Taxable Income (TI) Is: | Tax Is: | |||||
Not Over | $19,900 | - | - | - | 10% of TI | - |
Over | $19,900 | but not over | $81,050 | $81,050 | Plus 12% of excess over | $19,900 |
Over | 81,050 | but not over | $172,750 | $9,328 | Plus 22% of excess over | $81,050 |
Over | $172,750 | but not over | $329,850 | $29,502 | Plus 24% of excess over | $172,750 |
Over | $329,850 | but not over | $418,850 | $67,206 | Plus 32% of excess over | $329,850 |
Over | $418,850 | but not over | $628,300 | $95,686 | Plus 35% of excess over | $418,850 |
Over | $628,300 | - | - | $168,993.50 | Plus 37% of excess over | $628,300 |
TABLE #4 – Married Individual Filing Separately
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If Taxable Income (TI) Is: | Tax Is: | |||||
Not Over | $9,950 | - | - | - | 10% of TI | - |
Over | $9,950 | but not over | $40,525 | $995 | Plus 12% of excess over | $9,950 |
Over | $40,525 | but not over | $86,375 | $4,664 | Plus 22% of excess over | $40,525 |
Over | $86,375 | but not over | $164,925 | $14,751 | Plus 24% of excess over | $86,375 |
Over | $164,925 | but not over | $209,425 | $33,603 | Plus 32% of excess over | $164,925 |
Over | $209,425 | but not over | $314,150 | $47,843 | Plus 35% of excess over | $209,425 |
Over | $314,150 | - | - | $84,496.75 | Plus 37% of excess over | $314,150 |
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