As any Charlotte accountant will tell you, while each couple’s circumstances are unique, marriage generally influences your taxes in a number of ways. Marriage offers some tax benefits that allow you to pay less in taxes, and couples also have a greater range of tax options than single filers. In addition, after your marriage, some of the paperwork you must file differs from that which you had filed as a single person.
Tax Benefits of Marriage
While there can be many tax advantages of marriage based on your situation, some of the most common benefits involve estate planning and gift taxes, charitable contributions, and retirement accounts.
Estate Planning and Gift Taxes
Spouses can give each other gifts of money or other property without paying gift taxes on it. Since this can affect your estate planning, make sure you reexamine your estate plan after you get married.
Bigger Charitable Contributions Deduction
By making charitable donations while married, you can get a more significant tax deduction and, thereby, reduce your taxable income more than a single person. As of the 2021 tax year, a new CARES Act rule permits single filers an above-the-line tax deduction of up to $300 for cash gifts to charity, but it permits married filers double the deduction, up to $600.
IRA Beneficiary Filing Options
As a married person, you have a more extensive range of options for how to file taxes on funds you inherit from a deceased spouse’s retirement account. While single filers likely will need to pay taxes on those funds, married filers can choose to put off the distribution of those funds over a longer period of time and, if your tax bracket at that time is lower, pay less in taxes on that distribution. By naming your spouse as your IRA beneficiary, your spouse can treat it as their own IRA.
Then, how it is treated for taxes depends on whether the account is a traditional or Roth IRA. For traditional IRAs, spouses have longer to defer distributions than non-spouses; for Roth IRAs, spouses don’t need to make required minimum distributions (RMDs) during their lifetime, allowing them to bequeath the inherited IRA, in turn, to another.
Tax Changes Post-marriage
After you get married, there are specific essential tax changes of which to be aware.
Since you file your tax return under your Social Security Number (SSN), you need to notify the Social Security Administration (SSA) of any name change resulting from your marriage. The SSA must make the change in its system, then transmit that information to the IRS; make sure this process is complete before you next file your taxes. Otherwise, the name on your return may not match the name the IRS or SSA has on file for you.
You may want to fill out a new, revised W-4 form with your employer that reflects your change in marital status since the entries you make into your tax forms will differ from those in prior years.
When you get married, you have two choices of how to file your taxes: married filing jointly (MFJ) and married filing separately (MFS). Each has its own advantages and disadvantages, and making the one best for you depends on you and your spouse’s unique situation and circumstances. That said, the benefits for most couples of MFJ outnumber and outweigh those of MFS.
By filing jointly, you get a potentially lower tax rate. There’s also the possibility that you can deduct student loan interest payments from your taxable income, and you can’t do this when MFS. Even for those MFJ, however, there is an income limit involved; meaning, if you and your spouse’s combined income is too great, that deduction can be impermissible or, at least, restricted.
You can also claim deductions for your kids and childcare costs as a married filer. When MFJ, you can claim the child and dependent care tax credits, which you cannot claim when MFS.
Your filing status also affects which tax forms you must file with your return. When MFJ, you need only file a single Form 1040, and you need not distinguish which income, deductions, and credits apply to which member of the couple.
Qualifying couples MFJ can also claim the Earned Income Tax Credit (EITC.)
Note that your filing status is based on your marital status as of December 31 of the given tax year. That means, even if you spent most of the year single, you could not file as a single person if you are married as of that date.
Your tax bracket determines your highest possible income tax rate. Every filing status has its own tax brackets. Therefore, even if your income has not changed, your tax bracket may change after you’re married. If you file jointly, your incomes are combined, which could push one of you or you both into a higher bracket. However, if one of you earns more, it can push that person into a higher or lower bracket. Depending on your individual incomes, marriage could be a tax benefit or liability.
When you buy your first home as a married couple or sell your individual homes after marriage, it could avail you of tax benefits previously unavailable to you as a single filer. You can itemize your mortgage interest by owning a home as a deduction. By selling a home, you can deduct twice as much of your gain from your income as you can when filing singly. Be aware, however, that if it is a home only one of you owned, you can only take the larger deduction if both of you lived there as your primary residence for two years or more.
When filing jointly as a married couple, you could incur a penalty if you pay more in taxes than you otherwise would if you each still filed singly. This occurs, in part, because the standard deduction and MFJ tax brackets don’t always equal double the standard deduction and tax bracket for single filers.
In addition, when MFJ, you become "jointly and severally liable" for your spouse’s unintentional omissions or errors and intentional misdeeds. This means the IRS can seek payment from you and penalize you if they cannot collect from your spouse. Even if you and your spouse get divorced, this can still occur.
For guidance on the best tax filing options for you as a married couple, contact your tax accountant in Charlotte, If you don’t yet have one, Scott Boyar, CPA is the best tax accountant in North Carolina. He can help you figure out how to pay the least in taxes, given your financial situation, and ensure you don’t incur any penalties for incorrectly filing your taxes as a married couple. With all the Charlotte accountants to choose from, you can do no better than Scott Boyar. Let him be your new tax advisor in Charlotte, NC.