How Getting Married Can Impact Your Taxes
Whether you plan to get married or you recently got married, you may be wondering just how this big step is going to affect you and your taxes. Everyone has heard that as a married couple you will pay more in taxes than if you remain single.
While this may sound disappointing, it does not always spell trouble for couples and there are some advantages to being married when you do file your taxes. Below, we will cover some of the advantages offered to you when you file your taxes as married filing jointly.
When you file as a married couple, you can sometimes take additional deductions that you were not able to take when you were single. For instance, if you have a business and you have a substantial loss for the year, but your spouse makes a decent income, you can offset the loss with your spouse’s income on your tax return.
In addition, when you are married, you can deduct a higher amount of your adjusted gross income when you make contributions to charity organizations. When you file as single, you cannot deduct as much.
Lastly, if you file as single, you may not be able to claim the American Opportunity Credit for education expenses. For instance, if you are single, you cannot claim the credit once your income reaches $80,000, however, as a married couple, the credit is not phased out until you reach $160,000 in income.
If the home that you live in rises in value, you and your spouse can exclude up to $500,000 from your income. As a single person, this amount was previously $250,000.
The advantage to this is that both of your names do not have to be on the mortgage to get the credit as long as you have both lived in the home for at least two of the last five years.
When one spouse makes significantly less than the other, you do not have to pay such a high amount in taxes. The reason behind this is because you may fall into a different tax bracket than you did before.
For instance, the tax brackets are set up so that people who make more money are taxed at a higher percentage than those who make little money. Therefore, if you make less, you do not have to pay as much as someone who makes five times the amount you do.
If you make a hefty income, but your spouse does not have an income or a very small one, you and your spouse will fall somewhere in the middle, which means you do not have to pay in the high tax bracket as you may have done before you were married.
If you have ever given someone a nice handful of money, you know that you can be taxed on the amount. For instance, if you and your spouse are not married, you are capped at $14,000 in gift giving per year. If you give more than this, you will have to file a gift tax return.
When you are married, there is no limit on the amount of money you can give to your partner. As long as the two of you meet citizenship requirements, you do not have to skirt around a designated amount.
You can also leave as much money as you want to your spouse when you pass away without having to worry about your spouse paying an estate tax.
When you are married, you do not have to file two separate tax returns. All of your income and expenses are placed on the same tax return.
Being married has its perks and will allow you to claim more deductions and credits given you qualify for them. In addition, you will notice that many of the limits that were placed on items when you were single are lifted to a much higher amount now that you are married.
If you are newly married and you have never filed a joint return with your spouse, consider hiring a tax professional to help you fill out your tax return. Your tax agent understands the tax deductions and credits you can claim and working with a professional will limit the number of errors you make on your return.
Financial Balance LLC