How Marriage Impacts Your Taxes

January 20, 2021

Getting married is a time full of love, laughter, and hope for the future. So, when you say, “I do,” you’re probably not thinking about your next tax return. While that’s understandable, there are some tax-related things you should know about. That way, you and your beloved can live financially ever after. Pull up a chair, and we’ll share how marriage impacts your taxes.

Note: No matter what date you get married, the Internal Revenue Service (IRS) considers you as married for the entire year.

Paperwork 

Since you use your social security number when you file your taxes, you might need to change your name with the Social Security Administration (SSA). The name on file with the SSA must match the name you provide the Internal Revenue Service (IRS). Otherwise, you could cause confusion and delay the processing of your return. In addition, to ensure your tax withholding is correct, you’ll also need to fill out another Form W-4 with your employer. Contact your HR department for assistance.

Employer Benefits

Now that you’re married, you and your new spouse can get on each other’s benefits. It’s a good idea to compare what’s offered by both employers so you can choose the best combination of benefits for your situation. If you participate in a health savings account (HSA) or flexible spending account (FSA) program, your total household contributions can double. These tax-advantaged accounts can make your financial situation a little brighter come tax time.

Filing Status and Tax Bracket

Once you’re married, you have two filing statuses to choose from: married filing single or married filing jointly. Most couples elect to file jointly because it comes with additional perks, such as access to more tax credits and deductions. However, filing jointly could put you in a higher tax bracket (depending on your total income) and result in additional tax owed. You should also be aware of the potential “marriage penalty.” It occurs when the tax you pay as a twosome exceeds what you would have paid as single filers. 

The Tax Return Itself

When you file a joint tax return, you only have to submit one document to the government. That means you'll have more time and money for date night. However, if your beloved pulls a fast one on the IRS, and you knew about it, you’re liable for any penalties and punishments. Also, if one of you is subject to any garnishments, it could postpone or prevent any tax refund due to your household.

Related Reading: Individual Tax Payers: How to Prepare for Tax Season

Deductions and Credits

When you file a joint return, you’re eligible for twice the standard deduction of a single filer. That means you can lower your taxable income by $24,800. However, depending on your situation, it may make sense to itemize your deductions. Check with a tax or accounting professional for guidance.

Please note: If you go the married filing single route, you won’t be able to utilize or maximize tax credits and deductions such as:

  • Child and Dependent Care Tax Credit

  • Lifetime Learning Credit

  • American Opportunity Credit

  • Earned Income Tax Credit

  • Student loan interest deduction

Real Estate

When you sell your home as a single person, you can make up to $250,000 in profit, or capital gain, without having to pay taxes on the sale. When you’re married, that amount doubles to $500,000, a considerable bump in potential tax savings. Of course, there are rules you need to follow to be eligible. For example, both you and your spouse must have lived in the house for two out of the last five years, and one of you must have owned the property within the same timeframe.

Retirement Planning

An individual retirement account (IRA) can be a great retirement savings vehicle. Depending on your preference, you can elect to deduct contributions on your taxes or be eligible to withdraw funds tax-free in retirement. Typically, you need to have earned income through wages to participate. 

However, as a married couple, you could take advantage of the spousal IRA. A spousal IRA can make sense if one of you is unemployed. The employed partner would open the account and make contributions in the other partner’s name.

Estate Planning

Depending on your estate's size and where you live, your assets could be hit with an estate tax when you die. Fortunately, the tax doesn’t apply to your surviving spouse. The estate will avoid taxation until they pass away.

How Rapidly Can Help

Filing your taxes can be complicated, and adding a new person into your tax situation just makes things even more complex. Rapidly can connect you to the right tax professional for your unique circumstances. That way, you can focus more on making your new spouse happy than on paying Uncle Sam. Try our fast, easy, and free tool to get matched to a tax expert today!

Final Thoughts

This article should help you to understand how marriage impacts your taxes. But, since anything tax-related is incredibly nuanced, and we can’t cover every detail here, please don’t take it as professional advice. We encourage you to chat with your favorite tax professional about optimizing your taxes as a new couple.

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