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If you’re planning a wedding in the future or you’ve just tied the knot, congratulations! You’ve made a major life move that should be celebrated. And as the responsible person that you are, there’s no doubt that you’ve given a lot of thought to what marriage will mean, including any financial benefits, obligations, or just plain life changes. To answer these questions, here’s a succinct briefing on taxes for married couples. Read on for all you need to know about new tax credits and deductions that you may qualify for, whether or not you should file a joint tax return together or separately, and special circumstances that may apply to you.
Should We File as a Couple or Individually?
A lot of people are concerned about receiving a “marriage penalty” from the IRS—that is, being taxed more for combing incomes, putting you (and your spouse) in a higher income bracket. Naturally, the IRS applies higher tax rates to higher incomes. If you and your spouse’s salaries are similar, then there’s a good chance that you may indeed have to pay more taxes. However, if you and your spouse have a large disparity in personal income levels, then there’s a good chance that you’ll actually be receiving a bit of a tax bonus by getting married. The larger the disparity in incomes, the more likely that getting married and filing a joint return will push the higher earner’s income into a lower bracket, meaning that the two of you will actually pay less in taxes.
What Deductions or Tax Credits Do We Qualify for?
One of the benefits of getting married is being able to qualify for more charitable donation deductions by combining incomes, putting you in a higher tax bracket and therefore increasing the number of charitable contributions you can claim on your taxes. Another benefit is that if one spouse isn’t employed, they can still open an IRA account, putting away money for retirement and receiving tax benefits. If you and your spouse are also purchasing a home for the first time, there are a lot of tax deductions for first time home-buyers as well. Being married also can protect a spouse who acts as a benefactor in the unfortunate case that one spouse, particularly a wealthy spouse, passes away. A deceased spouse can leave tax-free money to a spouse, in any amount, without generating any estate tax, protecting the benefactor. Another benefit? Filing one tax return form instead of two is simply quicker and more efficient.
Are There any Special Circumstances that Might Apply?
The date that you’re married matters—marriage is counted for the entirety of the year, even if you’re wed on New Year’s Eve. Therefore, if you’re planning an end of the year wedding, keep in mind that you can file taxes as a married couple for the preceding months of the year. Another thing that may be applicable is what to do in the event that one of you owes back taxes. In this case, the spouse who doesn’t owe the back taxes can file a special document known as an 8379 Injured Spouse Allocation Form. The form ensures that the spouse who doesn’t owe back taxes still receives their tax return, even in the event that the spouse who does owe back taxes has his or hers withheld.
Getting married can be a tax benefit depending on your circumstances. For more information about filing the most beneficial way, contact an R&G Brenner professional today.