Marriage Taxes

Learn how marriage affects taxes. Most often this is the furthest thing from our minds during the wedding, but it plays a huge role on your taxes. Learn how marriage can impact your taxes, what are some of the benefits you and your spouse will receive as a married couple and much more.

When it comes to absolutes, it seems that death and taxes are two of the ones that jump out. Now that you are married, although the absolutes don’t change, there tends to be some light at the end of the tunnel when it comes to your taxes.

When you get married, the date of marriage will determine what tax year you can claim as being married. According to IRS rules, as long as you are married by December 31, you are considered married for the entire tax year.

Tax benefits of marriage

Marriage brings new options (beyond filing single), including filing your taxes together (joint filing) or filing as married, but submitting individual tax forms (married filing separate). Depending upon your situation, one of these filing options may provide far better results than the other. For instance, if both work and one makes quite a bit more than the other, filing a joint return may yield better tax advantages. On the other hand, if one has significant medical debt and is able to meet deduction levels set by the IRS or has tax issues, filing separately may provide better results.

Another potential advantage of filing a joint return is the standard tax deduction. Unlike the previous ‘marriage penalty’ that reflected a lower standard deduction for a couple than if filing separately, the standard deduction rate has been adjusted to being twice that of a single filer. That said, when the combined incomes are considered, joint filers in the higher tax brackets may not realize this advantage. Moving to the higher tax brackets can also result in losing the ability to realize previous deductions available to you.  

There are other key areas that are important to understand when you are married, whether filing a joint or separate return.

• Absent filing to claim a refund of withheld income tax, you can no longer be claimed as a dependent on your parent’s tax return if you file a joint return with your spouse.
• If your spouse has tax liability coming into the marriage…it doesn’t become yours (although the IRS still has the ability to keep your refund if your spouse has tax liability and you file a joint return).
• If you are unemployed and have an IRA, when you file a joint return, both parties can still make tax deductible IRA contributions. Check to see what the maximum contributions are for your tax year.
• If you sell your home that you have owned for at least two of the past five years and it was your primary residence at least two of those years, you may gain the benefit of doubling the capital gains tax exclusion. Thus, doubling the amount that is excluded from being taxed.
• When it comes to estate planning and gifting, spouses generally are allowed to gift each other unlimited cash and property free from gift taxes.

The moral of the story is that being married can potentially lead to benefits that you didn’t have access to when single…but, it is not an absolute. Being married isn’t the only factor, thus it is important to seek out a qualified tax professional to help you identify the best route when it comes to filing.