When you get married, there are new tax rules you have to follow. Some work in your favor, while others are considered a marriage penalty.
Change of Filing Status
When you’re legally married, your filing status changes. You can choose either Married Filing Jointly or Married Filing Separately. You can no longer choose to file as single.
A legal marriage can include a common law marriage recognized by your state.
When you file jointly, the income ranges for each tax bracket are basically doubled (with a few small differences). That accounts for the fact that you may have two earners filing on the same tax return.
When you file separately, the tax brackets are similar to a single filer. However, there are restrictions on certain deductions and credits. Filing separately may work best when there are large income differences between the spouses or other differences in their financial situation.
You can choose your filing status each year based on whichever saves you the most money. Most tax filing software lets you enter your info and then calculates your taxes both ways.
Beginning to File as Married
You start to file as married if you’re married at the end of the year. So if you get married on December 31st, you file as married for the entire year.
If you get married on January 1st, you don’t file as married until next April.
Remember taxes go by the legal date of your marriage. If you have an early wedding ceremony but don’t do the paperwork until later, you’re married as of the date your state legally recognizes your marriage.
Your Tax Withholding May Change
Because of oddities in tax law, you may pay more or less in taxes after you get married even if both you and your spouse make the same amount of money and have no changes in income.
You should always update your W-4 with your employer to reflect your married filing status and spouse’s income. Otherwise, you could end up with a surprise bill at tax time.
The Tax Policy Center has a good calculator that helps you calculate the potential tax advantages or disadvantages of getting married based on your situation.
Understanding the Marriage Penalty
The marriage penalty is when two spouses pay more in taxes than they would have if they filed as single that year. The marriage penalty has gotten smaller over the year.
Currently, there is no marriage penalty in terms of tax brackets until you’re in the middle of the 35% tax bracket. That’s a combined income of over $600,000 per year.
Most state and federal tax credits and deductions double for married filers. So if a single filer gets a $1,000 credit, joint filers get $2,000. If the income limit is $50,000 for a single filer, the limit is $100,000 for joint filers.
There are a small number of credits and deductions where joint filers get the same as single filers or get more than 1 single filer but not as much as 2 single filers would get.
Tax Breaks for Married Filers
Married couples with one working spouse or where one has a lower income often see the biggest tax benefit. That’s because joint tax brackets will usually result in a lower tax rate on the higher-earning spouse’s income.
A spouse who doesn’t work can also open a spousal IRA based on the working spouse’s income.
Spouses also have more freedom to transfer assets to each other, including after one spouse dies, without having to worry about estate taxes, gift taxes, or income taxes.
Most other increases in deductions and credits are simply a reflection that there are two people on the joint tax return instead of one.
You’re Responsible for the Entire Joint Tax Return
When you file a joint tax return, both spouses are typically responsible for making sure it’s accurate and paying the amount owed. Even if one spouse does the finances and taxes, the other spouse can’t say he or she didn’t know the other was cheating. So make sure you review and understand your joint tax return before you sign it.
There are limited exceptions where an innocent spouse may not be responsible if he or she didn’t know or have any reason to know a joint return understated income. There is also the injured spouse rule where one spouse may not be liable for tax debts incurred solely by the other.
So if you do run into tax problems, it may be worth talking to a tax accountant about how to avoid paying for your spouse’s tax issues. But it’s still better to know what’s on your tax return and ignore problems in the first place.
