Getting married can change your life in a myriad of ways, and one of those changes will be in how you do your taxes. Much like your marriage itself, your new tax picture can provide many benefits and perks. Things won’t always be sunshine and roses, though. If you’re not careful, getting married and filing a joint return can create some problems as well as perks. We’re here to help you navigate both so you can make the best possible decisions about your finances today and in the future.

Tax Advantages of Filing Jointly

Although they don’t require it, the IRS likes it when married people file their taxes jointly. As such, they offer several perks to try and convince newlyweds to combine their tax lives along with their personal lives.

The Highest Standard Deduction

Married couples who file a joint return are allowed the highest standard deduction that the IRS offers. The higher your deductions the lower your taxable income, so a large standard deduction can be a big help at tax time.

Similarly, a spouse with a lower income can help pull a higher-income spouse into a lower tax bracket. A doctor who marries a teacher may find herself paying less income tax after her wedding than she did when she was single. That’s certainly not a reason to get married, but it is a pretty nice perk.

Gift Tax and Charitable Deduction Increases

Every year, the IRS allows taxpayers to give monetary gifts up to a certain dollar amount without paying the gift tax. In 2022, this amount is capped at $16,000. This cap applies per person, however. If you get married, you can combine your gift-giving power and give up to $32,000 in gifts tax-free. Marriage also increases the maximum amount you can deduct for charitable donations.

IRA Benefits

IRA benefits are another great marriage perk. Single taxpayers can deduct contributions made to an IRA. In 2021, that number was capped at $6,000. Again, marriage doubles the number. Between the two of you, you can now contribute $12,000 per year to your IRA. If you’re focused on building your retirement account, doubling your IRA contributions is a great way to do it.

Estate Protection

The IRS is so tenacious that they even tax you when you die. Whatever you leave behind goes to your heirs only after the IRS takes their cut. Marriage allows you to skirt the estate tax if your estate is transferred to your spouse when you die. If you’re concerned about leaving your significant other a tax debt when you pass, know that getting married can eliminate the problem.

Filing Jointly is Easier

Theoretically, getting married and filing jointly can halve your tax bill. An often overlooked marriage tax benefit is that now two people can file one return. That’s one less tax preparation bill if you use a professional to prepare and file your taxes.

Tax Benefits of Filing Separately In Marriage

Although a marriage bonus can provide some great tax breaks if you file jointly, there are merits to filing separately even after you’re wed.

Liability Protection

Once you sign a tax return, you’re legally responsible and liable for the information on it. This doesn’t change for married couples filing a joint return. Sign the return and you’re responsible for every number on it, whether or not it came from you or your spouse. If you’re not comfortable vouching for your spouse, don’t.

You also may want or need to protect yourself from your spouse’s judgments and liens. Let’s say, for example, that life happened and you fell behind on your child support payments. To catch you up, the court has issued an order that your next tax refund is going to the child support agency rather than to you. In this case, your spouse may want to file separately. That way he still gets his tax return rather than seeing his share of the money taken by the court.

It’s smart to file separately if you are separating or in the midst of a divorce, as well. If you’re still technically married, you may legally choose to file together. But filing separately eliminates the need to decide who gets what share of a tax refund or who pays what portion of a tax bill. It also starts to separate your finances as quickly as possible, which may be desirable if you wish to buy a house or make other purchases on your own soon.

Avoiding the Marriage Penalty

When talking about the marriage penalty, we need to be clear. Many years ago, the standard deduction for married people was less than the standard deduction for two single filers. As such, taxpayers referred to the gap between the two numbers as the marriage penalty. That issue has since been fixed. Today, the term means something different.

Today, the marriage penalty refers to the fact that combining incomes may put married people into a higher tax bracket. Earlier we mentioned that a spouse with a low income could help pull the other spouse into a lower tax bracket, which is, of course, a good thing. Unfortunately, the reverse is also true. Two people who each earn a healthy salary may find themselves jumping up a tax bracket or two when they combine their income. In this case, filing separately may be the ticket.

Combining your incomes may also put some tax credits out of reach. The earned income tax credit (EIC), for example, can be a substantial amount of money. If combining your incomes takes you over the EIC threshold, you may want to file your returns separately.

You Have Lots of Medical Bills

If you itemize, taking a deduction for medical bills can lower your tax liability by a significant amount. The catch is that in order to deduct them, they must exceed 7.5 percent of your income. This percentage may prove easier to reach if you’re counting 7.5 percent of one income rather than two.

If you use this strategy, however, tread carefully. If you file separately and paid your medical expenses out of your own account, this strategy will work just fine. Pay your expenses out of a joint account, however, and the IRS counts each of you as having paid half of the bill. If you claim otherwise by placing all of the expenses on one return, the IRS may ask you to prove that it was your money alone that paid the medical bills.

Familiarity

Sometimes people like to file separately simply because it’s what they know. Especially if you got married later in life, you may have spent years managing your own finances and filing your own tax returns. After managing just fine on their own, some couples feel more comfortable keeping certain elements of their financial situations separate after they’re married.

If you do, it may simply seem easier to keep doing what you’ve been doing and keep your finances somewhat separate, including your taxes. The IRS doesn’t require spouses to merge their tax returns, so you’re free to continue filing separate returns if that feels natural and comfortable for you.

If you did merge your accounts and financial lives when you married, however, note that trying to pull everything back apart on paper at tax time can be quite a process. If you have merged, a joint return may be the easier way to go unless you have a compelling reason to do otherwise.

Potential Issues with Filing Separately

There are a few good reasons why you might consider filing separately even after you’re married, but there are also a few reasons you may not want to go separately.

Loss of Credits

Some credits and deductions are not available to taxpayers who file under the married filing separately heading. The EIC is one of them. You can take the EIC if you file as the head of the household, but you can’t do so if you file as married filing separately. There are several deductions and credits that this filing status will make you ineligible for, including the EIC, adoption credit, education credits, and the child and dependent care credit. Make sure you understand what you might be losing before you file without your spouse.

Note that you cannot simply file as single despite being married. You must choose the married filing separately heading (or head of household if applicable) to file your tax return without your spouse. This means there is no getting around the loss of these tax benefits.

Deduction Choices

An often overlooked caveat in the tax law is that spouses who file separately must choose the same tax deduction method. Let’s say your wife wants to file her taxes separately and itemize her deductions because she had a lot of medical expenses over the year. You had only minimal deductible expenses, however, and would fare better if you took the standard deduction. Somehow the two of you will need to come to an agreement on which deduction method to take. If your wife itemizes, you are required to do so as well, and vice versa. This is true even when you file separate returns.

The best way to solve this debate is often to figure the tax both ways and compare returns. Whichever option nets you the lowest tax bill or largest refund between the two of you is generally the way to go. If you’re having trouble working it all out, a tax pro can help.

When Should You Contact an Expert for Marriage Tax Benefits

Ideally, you should consult with a tax professional before or shortly after you get married. When you start looking at married vs single tax rules, you will see that there are many differences besides just the name of the filing status. It’s best to look at how marriage will change things in advance and plan your tax strategy accordingly so you can help yourself throughout the year.

If you wait until tax time to sort it all out, you may feel pressed for time, which can add to tax frustrations. It may also be too late to reduce your current year’s tax liability. It’s much better to plan ahead and to do so with a pro who has done this before.

And it just so happens that our professional CPAs have done this before. They have lots of experience helping taxpayers transition into married tax life, and they would love to help you as well. Reach out to us today and we’ll match you with an accountant who can help you tie the tax knot and make a smooth transition to joint tax returns.