Marriage changes many aspects of your life. One of these is the tax filing process. Your marriage can affect your filing's status, of course, and the deductions and credits you are entitled to, as well as your tax category. This new married couple tax guide will help you understand three of the most important tax changes that can happen when you say, "Yes, I do" to the love of your life.
Your tax filing status will change.
The obvious change that will result from getting married is that you will no longer be able to file your taxes as "single." Instead, you'll have a choice of two statuses for filing purposes: either you go with married filing separately or married filing jointly.
In several cases, married filing jointly is probably the best option. Separate tax filers lose access to several tax incentives, including commonly claimed deductions, such as interest on student loans and traditional IRA contributions. There is no reason to forgo these deductions.
However, suppose you are married, and you file a separate return. In that case, it makes sense in limited circumstances, for example, if you lose the ability to deduct medical expenses when you file a joint return or if you are concerned that your spouse may provide dishonest information on a joint return. It may come back and hurt you, and you don't want to share the legal responsibility for this.
Your tax category is subject to change.
As a married couple, the combined income will determine your tax category. You could find yourself in another tax bracket. For example, suppose your taxable income is $163,000, while your spouse's taxable income is $31,000. You would be in the 24% tax bracket before your marriage, while your spouse would be in the 12% tax bracket. But now that you are married, with your combined taxable income of $194,000, you would be in the 22% tax bracket.
You won't always change tax brackets when you get married. If you and your spouse earn fairly comparable salaries, this is less likely to happen. But it is possible, especially with high-income inequalities or if one of the spouses is not working, the change can affect the total amount of taxes owed.
Your eligibility for deductions and credits is subject to change.
Certain deductions and credits are subject to a means test. The combination of your post-marriage income may affect your eligibility for this income.
For example, for people without children, the income tax credit is available to single taxpayers whose adjusted gross income is up to $15,980 in 2021. But it is only available to married taxpayers without children and whose income is up to $21,920. If you previously qualified as a single tax filer but got married and combined your income, you may not be able to claim this credit if your joint income is very high.
Likewise, if you are a single taxpayer without access to a workplace retirement plan, you can make deductible contributions to a traditional IRA, no matter how much you earn. But if you get married, and your spouse has access to a work plan, income limits will apply, and your ability to claim this deduction may decrease.
Loss of eligibility for deductions and credits can mean that your tax bill will increase when you get married.
Be ready for how marriage will affect your taxes.
If you are legally married on December 31, you will be considered married all year round for tax purposes (even if you were just married on that day). It is important to know the implications, especially if it means that you will end up owing the IRS more money. These are the three most important changes you should be aware of, but it's probably a good idea to pay taxes upfront to avoid further surprises after this major change in your life. Also, it is best to consult a tax professional with your spouse to find out what is best for both of you tax-wise.
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Elliot Kravitz, ATP