Marriage Tax Benefits: What You Need to Know

Marriage is an important decision in anyone’s life, but what couples don’t always consider is just how much this can affect their taxes and tax returns. Surprising as it may be, it is largely untrue that getting hitched will result in higher taxes. There are several marriage tax benefits to consider that may make saying “I do” all that much sweeter.

How Does Marriage Tax Affect Your Finances?

When it comes down to it, the largest marriage tax benefit you can find is the potential to lower your combined tax brackets. In the past, married couples were forced to face the marriage penalty, something which pushed couples who earned similar salaries into a higher tax bracket than what they would be in if they were unmarried. Thanks to helpful steps taken by Congress, this penalty is no longer in effect and the cost of taxes for married couples filing jointly is now closer to what they would have owed on their own. While income-based penalties may still occur, it is also entirely possible for couples with largely different salaries to still benefit. This would allow the lower income to potentially pull the higher one down into a lower tax bracket, thus reducing their combined taxes.

How Does Marriage Tax Affect Filing?

A taxpayer’s filing status depends on whether they are considered married or unmarried on December 31, which would determine the filing status for the whole year.

Once you a married you will only be required to file and worry about one return come tax season. This in turn will take up less of your time individually, and won’t require the same amount of paperwork and document organization as if you were filing for two individuals. Should you require the assistance of one of our Raleigh CPAs for your personal taxes, contact us at  (919) 872-0866.

Are There Additional Marriage Tax Benefits?

There are several additional marriage tax breaks to be found when you file jointly. Although they may not all apply to your situation, it is well worth knowing what the potential benefits are.

Tax Shelter:

If your spouse owns a business that is losing money, those negative numbers could possibly benefit both of you. How you may ask? It begins with the fact that the spouse who is not earning money may also not be able to apply certain deductions, such as those regarding the house. In this instance it is possible for the other partner, however, to use those additional deductions as a way to claim their spouse’s loss as a tax write-off when filing their joint tax return.

Benefit Shopping:

Should both partners have access to work benefits from each of their respective jobs, it becomes possible for them to individually select the best perks and options between both plans. This curation can in turn, help to increase their tax savings. An example of this is through the use of a dependent care flexible spending account (FSA) which in turn will result in a lower taxable income.

Estate Protection:

Marriage can help to protect the assets of a deceased partner. This is because federal tax laws prevent any amount of spousal inheritance money from generating estate tax. This then means the surviving spouse can protect the estate of the deceased from taxation until their passing.

Unemployment Retirement Fund:

When you are married, one unemployed spouse can contribute to an individual retirement account (IRA) – an option that is not available to individual taxpayers. On top of this, eligible couples who file jointly can contribute to two separate IRA accounts (one for each individual) and receive tax benefits as a result. Additionally, the phase-out point for IRA benefits is much higher with a married couple than that of a single individual. Finally, even if a couple is ineligible to deduct their IRA contributions on their taxes, it is still possible for them to make such contributions in most cases.

Charitable Contribution Deduction:

Annual charitable contribution deductions are limited based on income, but having a spouse can raise that limit above the maximum of 50% of your income. Should one spouse fail to earn more than double the amount of their annual charitable contributions, those excess contributions are carried over to the following year. When couples file jointly however, the deduction accounts for the other spouse’s income, potentially resulting in a larger deduction that year.

Are There Any Downsides to New Marriage Tax?

Although there are a few downsides to the new marriage tax, they are easily handled and even avoided.

First and foremost, once you file a joint tax return, you and your partner are both equally responsible for the validity and correctness of all submitted information. This includes any errors that may result in fines and other potentially serious consequences. Fortunately, this doesn’t apply to any financial activity that occurred before your nuptials or if you can prove you were not aware of them.

Reaching the higher minimum income percentages needed to deduct medical expenses can become harder when there are two incomes, unless one, or both of you accumulate serious healthcare costs. Obviously, this is not a desirable solution.

Should you incur any wage garnishment due to issues such as an unpaid loan or child support against a spouse, you may face a delay or even the blocking of your refund.

Contact Our CPA Firm for Tax Services

Contact Steward Ingram & Cooper PLLC at  (919) 872-0866 to learn more about our tax services or fill out the form below.