Marriage is a sacred union. "For better or for worse. In sickness and in health.." The line we hear every wedding ceremony. This union is considered as a turning point from singleness. For women, a time to change their names and status in life. Marriage is not simple as it seems, it is complex, demanding and changes your life entirely. To the point that even taxes changed the way, it looks at you.
The following are the manifestations:
Filing Status
When you got married, the filing statuses that can be used on your tax return are married filing jointly (MFJ) or married filing separately (MFS). Your marital status as of December 31 will determine the tax filing option for the whole year. If you only got married at year-end, filing as a single is not an option even if you are not married for the most of the tax year. Married filing jointly is more beneficial for married couples for it is simpler and often cheaper. The couple will only file one form and no need to worry about itemizing the income, deductions and tax credits and to whose spouse it belongs. If married couple file a separate tax returns, they are ineligible for valuable tax breaks – child care credits and higher-education credits. Thus, it will result in a higher tax bill if combined.
However, joint filing of tax return means that you are jointly and severally liable for any income tax underpayments, interest and penalties, unintentional tax errors and omissions committed by your spouse. This also means that IRS can come after you to collect the deficiencies, even after you have been divorced.
Tax Brackets
Tax brackets are different for each filing status. Your income may no longer be taxed at the same rate as when you were single. These brackets will determine the highest rate of tax imposed on your income. For instance, as a single, you earn $20,000 and your tax bracket will be at 15%. Upon getting married, if the combined income is at $40,000 the tax bracket won’t change. Altering tax bracket will also depend on your earnings level as a couple.
Claim Exemptions and Standard Deduction
Married couples filing jointly may claim each personal exemptions on the tax return instead of the one exemption allowed when you filed as a single individual. The standard deduction allowed on the tax return is highest for married couples filing a joint return. For 2018, the standard tax deductions for single taxpayers increased to $12,000, while married couples filing a joint return and for the surviving spouse is up $24,000. Married taxpayers are required to file a tax return if you're gross when combined with your spouse ’s gross income, is more than the standard deductions, provided you are living in the same house and your spouse did not file a separate tax return.
Additionally, a dependent exemption is allowed for each child claimed as a dependent on the tax return.
Changing Your W-4
Form w-4 will indicate the tax situation of an employee. The employer will have to correct the amount of withholding tax from the employee’s paycheck based on his marital status, exemptions, and dependents. The worker can claim tax credits or an extra allowance if child care expenses exceed $2,000 per year. Form W-4 means fewer taxes are withheld from your pay.
Buying or Selling Your First Home
The couple’s combined incomes may allow them to purchase their first home or to sell their individually-owned before the marriage. Owning a home, the interest you pay on a mortgage is deductible on your tax return as an itemized deduction. If selling a home, the amount of gain that can be excluded from income doubles from $250,000 to $500,000. Be mindful that if one of you owned the home before the marriage, the $500,000 exclusion applies only if you both lived in the home for at least two years.
Name Change with Social Security
It is important to inform the Social Security Administration (SSA) of the name change by filing a Form SS-5. If the name on your tax return does not match with the name in the Social Security, the tax refund will more likely be delayed until the discrepancy is resolved. You should wait to file your return until after the name change process has been completed to avoid any complications. If you are worried about the tax filing deadline and no time to change the name, you may file a joint return using your previous name and then process it after settling the taxes.
Marriage Bonus and Penalty
Marriage bonus is dealing with a couple in which one person out-earns the other. If your spouse makes $200,000 and you earn $23,000, the difference is quite high. Your spouse falls into 33% bracket, while you on the 15%. When these earnings are combined, you are pulled down to 28% tax bracket which means fewer tax charges.
A marriage penalty is the quite opposite when the couple’s combined income resulted in a higher tax bracket. When your other half is earning $152,000 and you make $100,000, means both of you fall into 28% tax bracket. But when combined, you landed in the 33% tax bracket. This occurs because the married filing jointly (MFJ) income tax brackets and standard deduction are not always equal to twice the single income tax bracket and standard deduction. The marriage penalty is partly alleviated because the lower income tax bracket (10% and 15%) and the standard deduction for MFJ are exactly double that of single individuals.
Marriage is a socially inviolable union and designed for a lifelong commitment to joy and love. Marriage is about sharing everything you have with the other person. So then our tax laws are patterned to fit the originally-designed and purpose of marriage.
