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What is the primary consequence of filing as Married Filing Separately (MFS)?

  1. Lower tax brackets

  2. Higher tax rates and various credits not available

  3. Eligibility for additional credits

  4. Automatic extension of tax deadline

The correct answer is: Higher tax rates and various credits not available

Filing as Married Filing Separately (MFS) can have significant implications for a taxpayer's overall tax situation. One of the primary consequences of this filing status is that it typically results in higher tax rates compared to other options. Additionally, certain tax credits and deductions that are available to those filing jointly may not be accessible when filing separately. For instance, taxpayers who file MFS often lose the ability to claim certain credits, such as the Earned Income Credit and the Child and Dependent Care Credit. Other tax benefits may also be limited; for example, the maximum allowable contribution to an Individual Retirement Account (IRA) may be reduced. Overall, this means that while there may be specific scenarios where filing separately makes sense, the broader consequences usually involve a tax rate increase and a reduction in available credits, leading to a potentially larger tax burden. In contrast, the options of lower tax brackets, eligibility for additional credits, or automatic extension of the tax deadline do not generally apply to the MFS filing status in the same significant way. The filing status choice can have a profound impact on a family's tax liabilities, influencing their overall financial landscape.