One of the most frequent questions during the annual IRS filing season is whether it is more beneficial to file a joint or separate tax return.

Since 2017, Portuguese married couples and partners living in a legally recognized civil partnership have been able to choose each year the filing method that offers the greatest tax advantage.

So, which option should you choose?

Joint or Separate IRS filling: Understanding the mais differences

Under separate taxation, each member of the couple submits their own IRS return, declaring their individual income, tax withheld at source, and deductible expenses.

Under joint taxation, the couple submits a single tax return that includes the income of both spouses or partners, as well as that of any eligible dependants.

There is no universal answer as to which option is best.

The most advantageous choice depends on several factors, including:

• each partner’s level of income; 
• the available tax deductions; 
• the composition of the household; 
• and the applicable IRS tax rates. 

For this reason, it is a dvisable to compare both scenarios before submitting the tax return.

How Tax Deductions Are Affected

Tax deductions reduce the amount of IRS ultimately payable by allowing taxpayers to deduct certain eligible expenses from their tax liability.

However, these deductions are subject to maximum legal limits.

A critical point to keep in mind is that these maximum limits are not doubled when filing jointly.

As a result, couples with significant deductible expenses may reach the maximum deduction threshold more quickly, meaning that additional eligible expenses will no longer produce any further tax benefit.

For households with high-deductible expenses, filing separately may therefore prove to be the more advantageous option.

The impact on Income Tax Rates

Portugal applies a progressive income tax system, meaning that tax rates increase as taxable income rises.

When a couple files separate tax returns, each individual is taxed according to their own taxable income and the IRS tax bracket that applies to them.

When filing jointly, however, the taxable income is calculated differently.

The tax authorities determine the couple’s taxable income using the following formula:

Combined income − Specific deductions = Result ÷ 2

This mechanism effectively calculates the average taxable income of the couple before applying the corresponding IRS tax rates.

This can produce significant tax savings where there is a substantial difference between each partner’s income.

In these situations, the lower-income spouse or partner reduces the couple’s average taxable income, potentially placing them in a lower tax bracket and reducing the overall tax payable.

For many households, this averaging mechanism represents one of the main advantages of joint taxation.

What happens if you have children?

If you choose joint taxation, all eligible dependent children are included in the single tax return submitted by the couple.

If you choose separate taxation, dependents may generally be allocated between the two tax returns in the way that provides the greatest overall tax benefit.

Where there is only one dependent child, it is often more advantageous for that child to be included on the tax return of the higher-income spouse or partner, as this may maximize the available tax deductions.

However, the optimal solution depends on the family’s individual financial circumstances.

The importance of running both tax simulations? 

As this comparison demonstrates, there is no filing option that is always more beneficial.

The best choice depends on the household’s income levels, deductible expenses, number of dependents, and applicable tax rates.

It is highly recommended that, before submitting your annual IRS return, you run both the joint and separate filing simulations available through the Portuguese Tax Authority’s online filing system.

Comparing both outcomes is the most reliable way to determine which option minimizes your tax liability and maximizes your potential refund.

If you are unsure which filing method is most advantageous for your circumstances, a Certified Accountant can help you assess both scenarios and ensure you make the most tax-efficient choice.