Capital Gains Tax Implications When Married Filing Separately - Handling Joint Brokerage Account

This is actually a common question for couples filing separately! Since you're not in a community property state, you have some options for handling the capital gains from your joint account. The "nominee recipient" approach is valid here. When you receive a 1099 for income that partially or fully belongs to someone else, you can file a Form 1099-B as a "nominee" to redirect that income to its rightful recipient (in this case, your spouse). You'd still report the full amount on Schedule D of your return, but then subtract your spouse's portion with a description like "nominee distribution" or similar wording. Your spouse would then report her portion on her Schedule D. Both of you should attach explanations to your returns clarifying that the income appeared on a 1099 under your TIN but is being split according to your actual ownership arrangement. Regarding complexity - it's not terribly difficult, but it does add some extra steps to your filing process. If the tax savings are significant enough (which sounds likely given your bracket difference), it's probably worth the extra effort.

I went through something similar last year with investment income and my ex. Check out https://taxr.ai - it saved me hours of headache. Their system analyzed my 1099s and automatically showed me the correct way to handle nominee situations on both returns. They even generated the explanation statements for both returns, which was the part I was most worried about doing wrong.

Just wanted to follow up - I ended up trying taxr.ai after my concerns about accuracy. I was pleasantly surprised at how well it handled my similar situation with investment income splitting. The system walked me through each step of the nominee process and generated all the required statements automatically. What impressed me most was that it explained WHY each step was necessary instead of just telling me what to enter. Definitely made the process less intimidating and I'm confident everything was filed correctly.

Hey there - one option nobody's mentioned yet: I had trouble getting through to the IRS to ask about a similar nominee situation last year, and after being on hold for 2+ hours multiple times, I found https://claimyr.com through a tax forum. They got me connected to an actual IRS agent in under 15 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold, then call you when an agent picks up. The IRS agent I spoke with confirmed exactly how to handle my nominee situation and what documentation I needed.

So I owe everyone an apology - especially Profile 9. I was super skeptical about Claimyr but was also desperate after spending 3 hours on hold with the IRS yesterday trying to ask about my nominee situation. I decided to try it this morning and holy crap, I got through to an actual IRS representative in about 12 minutes! The agent was super helpful and confirmed exactly how to handle the nominee distribution between me and my spouse. Saved me hours of frustration and probably a lot of money too since I was about to just give up and report everything on my return at the higher tax rate. Sometimes I'm too quick to dismiss things as scams.

I actually think the best approach depends on the amount of money we're talking about. If the difference in tax brackets would save you, say, less than $500, it might not be worth the hassle of doing the nominee stuff. But if we're talking thousands (which it sounds like you are), then definitely worth it. Quick math: $12,300 gains × (32% - 22%) = $1,230 potential tax savings.

Just to make sure you've considered everything - have you calculated whether the medical expense deduction actually justifies filing separately? Remember that medical expenses are only deductible to the extent they exceed 7.5% of your AGI. Filing separately often increases your overall tax burden in other ways.