The Tax Advantages of Getting Married
Call it a marriage gift from the IRS, or one of the perks of getting married... whichever way you see it, there are tax advantages that come with marriage. Learn about them all here.
Get Into a Lower Tax Bracket
For years, individuals have complained about the marriage tax, which occurs when two spouses with identical salaries combine to put them in a higher tax rate than they would be if they were single. Congress made efforts to minimize the penalty, bringing the combined tax payment for married couples filing jointly closer to the amount they would have owed if they had filed as single taxpayers.
There may still be a marriage penalty depending on the salaries. However, if the taxpaying couples' wages are significantly different, the lower one can push the higher one into a lower tax bracket, lowering their overall taxes.
Use Your Marriage as a Tax Shelter
While it's not a good idea to look for a partner solely because their business is losing money, it's worth noting that one spouse's dismal figures can benefit both spouses. Some deductions, such as those related to the house, may be unavailable to the spouse who is losing money – say, in business. On a joint return, the spouse who makes money may be entitled to use those unused tax deductions and claim the other's loss as a tax write-off.
An IRA Can be Opened by a Jobless Spouse
A single taxpayer without a job is normally ineligible to contribute to a personal retirement account (IRA). A married couple without a job can, however, contribute to an IRA with their joint salary.
Couples filing jointly who are eligible can contribute to two separate IRA accounts, one for each spouse, and gain significant tax benefits. Furthermore, for married couples, the point at which IRA benefits are phased down based on income is significantly higher than for single people. Even if a couple isn't qualified for a tax-deductible IRA contribution due to income restrictions, both spouses should be able to contribute non-deductible IRA contributions.
Choose the Better Benefit Plan
Married couples can "benefit shop" for each other. If both couples have employee benefits packages, they can usually choose the most desirable perks from the two plans. Benefits sometimes fluctuate across spouses, and the correct combination of benefits from two plans might help a couple save money on taxes. A couple with dependents, for example, could use one spouse's dependent care flexible spending account to reduce their taxable income.
Deduct More of Your Charitable Contributions
The amount of charitable contributions you can deduct in a year is limited by your income, which is normally no more than 50% of your income. Having a spouse can help you push past that limit. If one spouse's income is less than double their charitable donations in a given year, the surplus contributions are carried over to the following year. Couples filing jointly, on the other hand, can deduct more in the current year because the deduction amount includes the income of the other spouse.
Contributions have been raised to 100 percent of your adjusted gross income (AGI) for 2020. If you take the standard deduction, you can deduct up to $300 in qualifying cash contributions for each tax return in 2020. For the tax year 2021, this amount is up to $600 for married couples filing jointly and $300 for other filing statuses.
Secure More of Your Assets
Being married can aid in the protection of a wealthy person's estate. You can leave any amount of money to a spouse without triggering estate tax under federal tax laws, therefore this exemption can usually safeguard the deceased's estate from taxation until the surviving spouse dies.
Filing Takes Less Time (and Less Money)
This one is straightforward: if both spouses must file a single tax return, it is likely that the documentation will take less time to assemble (at least for the spouse who isn't filing the taxes) and will cost less to complete.
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The Tax Disadvantages of Marriage
While there are many tax advantages to marriages, there are also some disadvantages.
You are totally liable for every number on the joint return after you sign it. You and your spouse are both responsible for the repercussions if your partner falsifies a figure. However, you are not liable for your spouse's mistakes or intentional omissions if they occurred before you married or if you can prove that you were unaware of them.
Given your joint income, it may be more difficult to attain the increased minimum percentages of income required to deduct medical expenses (in 2020, it must be larger than 7.5 percent), unless one or both of you have significant health care expenses.
A return could be delayed or stopped if there is a garnishment for an outstanding loan or child support against a spouse.