How Does Marriage Affect Taxes?

Marriage brings many changes to a newly married couple’s life. One of these changes is their tax situation. For most couples, joint filing has tax benefits. Here, we overview how marital status affects taxes.

If you’re making financial planning decisions, contact an experienced family law lawyer for guidance. Many aspects of taxes are state-specific. Other factors can affect your financial decisions, like income, children, assets, and employment. A local and experienced family law attorney can assess your situation and offer you tailored legal advice.

Filing Status and Tax Returns 

One of the first things married couples must consider is their filing status. The Internal Revenue Service (IRS) recognizes several filing statuses. Married couples typically choose between married filing jointly and married filing separately.

Filing a joint return often results in a lower tax bill. Joint filers have a higher standard deduction and tax benefits available. However, separate returns may be better for some, especially if one spouse has significant medical expenses. 

Standard Deduction and Tax Brackets 

The standard deduction is a crucial factor in tax filing. For the tax year 2024, married couples filing jointly enjoy a standard deduction higher than that for single filers. This larger deduction can reduce your taxable income. Additionally, the tax brackets for joint filers are broader. This can potentially lower the overall tax rate for couples compared to singles with similar combined income. 

Marriage Penalty and Marriage Bonus 

The marriage penalty occurs when a married couple’s combined income pushes them into a higher tax bracket. This results in a higher tax liability than if they were single filers. Conversely, a marriage bonus can happen if the combined income puts the couple in a lower tax bracket.

Under the tax code, high-income couples are more likely to face a marriage penalty. Those with a single earner or lower combined income might benefit from a marriage bonus. 

Tax Benefits for Married Couples 

Married couples can take advantage of various tax benefits. For example, the Child Tax Credit and Earned Income Tax Credit (EITC) often benefit joint filers more than single filers. The EITC has specific income limits, and filing jointly can increase the available credit. Couples also benefit from mortgage interest, student loan interest, and retirement account deductions. 

Child Tax Credit 

The Child Tax Credit provides substantial tax relief for parents. Married couples filing jointly can claim a higher credit amount than single taxpayers. This credit directly reduces tax liability, making it a valuable benefit for families. 

Earned Income Tax Credit 

The EITC is designed to assist low to moderate-income workers. The combined income limits for married couples are higher, allowing a more substantial credit. This can significantly reduce your tax bill or even result in a tax refund. 

Retirement Accounts and IRA Contributions 

Married couples can contribute to retirement accounts such as Roth IRAs and traditional IRAs. Contribution limits are higher for joint filers. This allows couples to save more for retirement with tax advantages. Retirement contributions may lower the adjusted gross income, further reducing taxable income. 

Tax Deductions and Itemized Deductions

Married couples can claim itemized deductions if they exceed the standard deduction. Itemized deductions can include medical expenses, mortgage interest, charitable contributions, and local taxes. With combined expenses, itemizing can provide greater tax benefits than the standard deduction. 

Medical Expenses 

Medical expenses are deductible if they exceed a certain percentage of the adjusted gross income. Combining medical expenses can help married couples reach this threshold. 

Mortgage Interest Deduction 

Homeowners can deduct mortgage interest on their federal income tax. A married couple’s combined income can support a larger mortgage, leading to a greater interest deduction. 

Social Security and Retirement Plans 

Marriage also affects social security benefits and retirement plans. The Social Security Administration (SSA) provides spousal benefits. One spouse receives benefits based on the other’s earnings record. This can be advantageous, especially if one spouse has a significantly higher income. 

Retirement Plans 

Retirement plans such as 401(k)s and IRAs offer tax advantages. Married couples can contribute to each other’s retirement accounts, maximizing their tax-deferred savings. Additionally, Roth IRA contributions are more flexible, with income limits for joint filers. 

Tax Implications and Planning 

Understanding the tax implications of marriage is crucial for effective tax planning. You should consider how your combined income, deductions, and credits will affect your tax situation.

Marriage also affects estate tax and local taxes. The federal estate tax has exemptions for spouses. This allows an unlimited marital deduction. This means one spouse can transfer assets to the other without estate taxes. Some states also have their own estate taxes, which may offer similar benefits. 

State and local taxes vary. Married couples should understand how their filing status impacts their liability. Some states offer tax advantages to married couples, while others may impose a marriage penalty. 

How a Lawyer Can Help

Marriage brings many changes and tax implications. You should understand how it will affect your taxes. Stay informed and proactive. You and your spouse can achieve better financial outcomes and enjoy the tax advantages that marriage offers. Consult a local family law lawyer who can provide personalized advice.