How Marriage Affects Your Taxes

How Marriage Affects Your Taxes: the Good and the Bad

For most couples, marriage is probably a decision based on love, and finances are an afterthought.  While we don’t necessarily disagree, married couples or those considering marriage should still ask: How does getting married affect taxes?

As with most financial questions, there isn’t one simple answer.  Every couple’s financial situation and therefore taxes differ.  For the best, most accurate advice, you’ll want to speak with your accountant.  However, that doesn’t mean we can’t help you understand the basics.  Keep reading below to learn about marriage tax benefits, tax consequences of marriage, and more!

Marriage Tax Benefits

Once you’re married, you are left with two tax filing options.  Either “married filing single,” or “married filing jointly.” 

All the points we’ll touch on referring to the changes you’ll see if you choose to file jointly.  So in that case, let’s start with the good news about how getting married affects taxes, shall we?

a) File Once, Pay Once

If you and your spouse choose the “married filing jointly” option, you’ll only have to file ONE return.  This likely means your accountant will spend less time and therefore charge less money. 

And, since no one looks forward to taxes, why not file once and get the whole thing over with sooner? Certainly, if you’re truly a financially savvy couple, you won’t even have to discuss how to pay the accountant.  Simply charge it to your joint bank account.  And if you don’t already have one set up, what are you waiting for?

b) Your Tax Bracket Could be Lower Together

Now just as we said before, everyone’s financial situation is unique, so this isn’t always true.  However, if there’s a huge difference between you and your spouse’s income, you’ll likely get benefits. 

Here’s the tax bracket for 2020:

Tax rateSingle Married, filing jointly Married, filing separately
10%$0 – $9,875$0 – $19,750$0 – $9,875
12%$9,876 – $40,125$19,751 – $80,250$9,876 – $40,125
22%$40,126 – $85,525$80,251 – $171,050$40,126 – $85,525
24%$85,526 – $163,300$171,051 – $326,600$85,526 – $163,300
32%$163,301 – $207,350$326,601 – $414,700$163,301 – $207,350
35%$207,351 – $518,400$414,701 – $622,050$207,351 – $311,025
37%$518,401 or more$622,051 or more$311,026 or more

Let’s say you earn $100,000/year and your spouse earns $25,000/year.  Your combined income would be $125,000.  This keeps you in the 22% tax bracket when you file as “Married, filing jointly”.

On the contrary, if you alone earned $100,000, then you would be in the 24% tax bracket when you file as “Married, filing separately”.

In this example, you have the advantage of combined incomes on your side. Instead of getting in a 24% tax, you will just get a 22% tax at most.

c) Your Inherited Property Could be Tax-free

At first glance, this might seem like a great way that getting married affects your taxes.  However, it is a bit unpleasant.  In current tax laws, when one spouse dies, they can leave any money or property to their spouse, tax-free. 

When your spouse dies, you pay no-tax for the property he left (e.g. House)

While this might not be a law you want to benefit from anytime soon, it’s something to keep in mind.  Especially if you and your spouse have talked about arranging estate planning sometime soon.

Turbo tax has a good explanation of how inheritance tax works. You can check it our here.

Tax Consequences of Marriage

No good in life can come without bad.  So if you want the whole story about how does getting married affects taxes, read on to learn about tax penalties.

a) Higher Student Loan Payments

So, let’s say choosing “married filing jointly” was looking like a pretty good option.  Sadly, if you have high student loan payments, your mind might change.  That’s because most student loan companies base monthly payments on tax recorded incomes. 

Generally, they expect borrowers to pay 10% of their monthly income every billing cycle.  So, to put this in perspective, let’s use this scenario:

You are single and earn $25,000/year. Normally, you are only expected to pay $2,500 towards your student loans each year. 

But then, you got married, you and your husband’s combined income became $125,000. That means she’d have to pay her creditors $12,500 per year, even though her own personal income didn’t change. 

It seems like a conversation you’d want to have with your spouse before the bill came in.  Don’t you think?

b) You’re Both Responsible for the Facts and Figures

People usually get married with the best intentions.  Rarely does anyone get married believing their spouse is someone dishonest or untrustworthy. 

However, if someone in the marriage does falsify numbers or give untrue tax reports, you are both responsible.  It might not seem fair, but it’s definitely something you need to know about how does getting married affects taxes. 

Lying in your Tax return results to fraud and affects marriage

Of course, there are ways a spouse could prove their innocence, but that might be a discussion for another article. However, to avoid such financial disputes altogether, we suggest you read “3 Tips to Successful Financial Marriage.”

c) The Marriage Penalty

You might have already heard of this final consequence of how getting married affects taxes: “the marriage penalty”.  This concept used to be a bigger point of contention between married couples and the IRS, but not so much anymore.  Recently, since tax brackets were redesigned, fewer and fewer couples are falling victim to the marriage penalty.  But, it’s still something to be aware of. 

Basically, this tax increase would affect couples who earn similar, high salaries.  To be more specific, while the 37% tax bracket begins for single people with an income of $510,301 or higher, it starts at $612,351 for those married filing jointly.

Frequently Asked Questions: How Does Getting Married Affect Taxes

So those were the overall pros and cons of getting married and filing jointly.  But perhaps you still have some more questions.  If so, don’t sweat it!  Read below for the most commonly asked questions couples want to know about taxes.

1) Do you get taxed more when you get married?

To keep it simple, we advised you to remember this simple rule of thumb:

If your incomes are in completely different tax brackets, you’ll be taxed less than when you were filing as single. 

On the other hand, If your incomes are in similar low to medium tax brackets, you’ll be taxed generally the same. 

And finally, If both partners earn more than $500,000 annually, you’ll be taxed more.

2)    What to claim on taxes when married?

The first and most obvious being your children.  Even the government knows children can be an expense, and therefore encourages couples to claim their children and childcare expenses. 

Claim Children as Dependents for Tax return in marriage

Also, if either partner still needs to pay off student loans, the interest paid on them can also be claimed.  The same applies to the interest paid on your mortgage loans. 

One final, and perhaps less common claim, are business losses. Should one spouse become the sole breadwinner due to their partner’s business failures, this can also be claimed.  And while no one hopes for their spouse’s business to fail, this can be one small financial silver lining.

3)    Do you get a tax break for being married?

You may also want to know if you will get a tax break, or reduction/rebate, for being married.  But again, it depends on your situation. 

While a single person can enjoy a tax deduction of $12,200, those married filing jointly will receive $24,400. 

Obviously, If you’re good with numbers, you’ll see that it’s relatively the same thing.  The IRS simply doubles the deduction for a joint filing. 

However, this standard deduction, or tax break, is not your only option.  Whether you’re married or single, you also have the option to itemize deductions. 

Also, itemizing deductions is a good option if you had justifiable financial circumstances that year that exceeded the standard deduction amount.  Here are some examples:

Large medical expenses, mortgage interest paid real estate taxes or large donations to charity.  Generally speaking, it’s an option that many homeowners consider given the ability to itemize real estate costs.

Final Thoughts

Overall, for the majority of couples, filing jointly just makes more sense.  You’ll likely pay less in taxes together than you would separately.  Plus, you’ll only have to prepare and pay for one batch of paperwork.  Of course, there are cases where filing separately might be more financially beneficial.  This is especially true for couples where both partners earn more than $306,175 each.  Although you’ll definitely want to get the advice of a professional accountant before making any official filing decisions.

If you’re newly married and want to share your thoughts on how does getting married affects your taxes, let us know in the comments below! 

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