8 Marriage Tax Changes You’ll See After Tying the Knot
Editor’s Note: One of our most popular posts ever detailed is about marriage tax changes that may affect you after tying the knot – including marriage tax benefits and tax credits. So, how does marriage affect taxes? We’ll tell you here…
1 – Filing Status Options – Are There Marriage Tax Benefits to Different Filing Statuses?
Once you get married, the only filing statuses that can be used on your tax return are married filing jointly (MFJ) or married filing separately (MFS). Marriage tax benefits for filing taxes together are the following:
- The tax rate is usually lower.
- You can claim education tax credits if you were a student.
- You may be able to deduct student loan interest. (Student loan interest is not allowed when MFS, but it’s also limited by income, so if combined income is too high, student loan interest can be limited or disallowed.)
- You can claim deductions for children and childcare expenses. Child tax credit and credit for other dependents are both permitted on an MFS tax return. Child and dependent care credit is not.
- You can file for the Earned Income Tax Credit (if you qualify).
Your filing status is determined on December 31 of each year, so even if you were not married for most of the tax year, you do not have the option of filing as single if you are married on that date. Generally, married filing jointly provides the most beneficial tax outcome for most couples because some deductions and credits are reduced or not available to married couples filing separate returns.
2 – Marriage and Tax Brackets
These tax brackets will determine the highest rate of tax imposed on your income. Tax brackets are different for each filing status, so your income may no longer be taxed at the same rate as when you were single. When you are married and file a joint return, your income is combined — which, in turn, may bump one or both of you into a higher tax bracket.
3 – Marriage and Tax Deductions – What Changes?
When you file your return each year, you have to determine if it is more beneficial for you to itemize your deductions as opposed to claiming the standard deduction. Once you are married and own a home, many people find that it is more advantageous to itemize their deductions — typically because deductions such as mortgage interest result in a higher total deductible amount than the standard deduction.
The standard deduction allowed on the tax return is highest for married couples filing a joint return. (See exemptions and deductions explained.) For 2019, single taxpayers are allowed a standard deduction of $12,200, while married couples filing a joint return are allowed a deduction of $24,400.
4 – Changing your W-4
It may be wise to change your Form W-4 with your employer to reflect a change in marital status, as your form entries will be different than previous years.
5 – Buying or Selling Your First Home
Once you get married, your combined incomes may allow you to purchase your first home or you may choose to sell individual homes owned before the marriage. When you own a home, interest you pay on your mortgage is deductible on your tax return as an itemized deduction.
If you are selling a home, the amount of gain that can be excluded from income doubles from $250,000 to $500,000. Be cautious, though: if only one of you owned the home before the marriage, the $500,000 exclusion applies only if you both lived in the home as your main home for at least two years.
6 – Gift Taxes and Estate Planning
Spouses are allowed to give unlimited gifts of cash or other property to one another free of gift taxes. This provision has important implications for estate planning purposes, so be sure to revisit your estate plan once you get married.
7 – Name Change with Social Security
Because your return is filed under your Social Security number (SSN), it is important to ensure that the Social Security Administration (SSA) has been notified of any name changes that take place. The SSA must process the change in the system and relay that information to the IRS before you file your return. You should wait to file your return until after the name change process has been completed to avoid any complications that could arise if the name on the return does not match the SSN on file with the SSA.
8 – Marriage Tax Penalty
A marriage penalty exists when two individuals filing a joint return pay more tax than the sum of their individual tax liabilities calculated as if they were filing as single taxpayers. One reason this occurs is because the MFJ income tax brackets and standard deduction are not always equal to twice the single income tax bracket and standard deduction. Under current law, the marriage penalty is partly alleviated because the lower income tax brackets (10%, 12%, 22%, 24%, and 32%) and the standard deduction for MFJ are exactly double that of single individuals.
Are There Other Marriage Tax Credits You Could Claim?
Marital tax changes can get complex – which is why many people enlist the help of a tax pro to find post-marriage tax credits and deductions they could otherwise be missing. For additional questions and guidance, locate your nearest H&R Block tax professional.
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