Oregon Tax Consultants Practice Exam

If one spouse itemizes deductions while filing as MFS, what must be true for the other spouse?

1. They can take the standard deduction

2. They must also itemize their deductions

3. They can choose to take the higher of the two

4. They are allowed to ignore the deduction rules

The correct answer is: They must also itemize their deductions

When one spouse itemizes deductions while filing as Married Filing Separately (MFS), the other spouse is required to also itemize their deductions. This is because tax regulations stipulate that if one spouse opts to itemize, the other spouse cannot take the standard deduction; they must follow the same deduction method. This rule ensures parity in how deductions are handled between spouses in this filing status. The inability for the second spouse to choose the standard deduction illustrates the complexity of tax planning in a situation where couples enroll in MFS status. It's also important to note that this requirement can significantly impact the overall tax liability for both individuals, emphasizing the need for careful consideration during tax preparation. This rule aims to maintain equity and consistency in tax treatment within married couples who choose to file their taxes separately.