Marriage Tax - Married and Filing Taxes Jointly or Separately
Did you get married this year? Congratulations! Getting married is a big step in your life and will also impact your tax return. Take a look at some important information that will help when planning your taxes or preparing your tax return now that you are married:
Your New Married Filing Status
Your filing status is important and is used for many things on your tax return, such as determining your standard deduction, whether you need to file a return, the amount of tax you owe, and whether you qualify for various deductions and credits.
Your filing status depends partly on your marital status on the last day of the year. If you're legally married as of December 31, you're considered to have been married for the full year and must file as either married filing jointly or married filing separately.
Married Filing Jointly
If you are married, you and your spouse can file a joint return. If you file a joint return, you both must include all your income, exemptions, deductions, and credits on that return. Even if you or your spouse had no income or deductions, you can file a joint return.
Learn more about the Married Filing Jointly filing status
Married Filing Separately
If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. You can file a separate return even if only one of you had income. However, the married filing separately status rarely works to lower the family tax bill. For example, you can't have one spouse itemize and claim all the deductions while the other claims the standard deduction. Both spouses must either itemize or use the standard deduction. You can't mix and match.
If you file a separate tax return, many tax breaks will be limited or completely unavailable to you:
Learn more about the Married Filing Separately filing status
The Marriage Penalty and The Marriage Bonus
A sign that the honeymoon is over:
She begins to feel like she was never anything more than a tax deduction to him!
You've probably heard about the marriage tax penalty: the idea that a married couple pays more income tax than they would have to if they remained single. But a lot of people don’t know that married couples actually get a marriage bonus, and often pay less income tax than they would if each partner were single. This is because of the graduated nature of the tax rates, which applies higher tax rates to higher income rates.
This is how the marriage penalty might get you: when you combine incomes on a joint return, some of that income can push you into a higher tax bracket than you would be in if filing as single. In recent years, Congress has made large strides toward alleviating the marriage penalty. The top of the 10% and 15% tax brackets on joint returns are now precisely twice as high as the ceilings on single returns (they used to be less than double).
As higher incomes fall into higher tax brackets, the breakpoints on a joint return aren't quite double the level on a single return. If the spouses' incomes are unequal, it is possible that combining them on a joint return will pull some of the higher-earner's income into a lower tax bracket. That's where much of the marriage bonus comes from—when one spouse often makes much more income than the other. Of course, this could also push the higher-earner into a higher tax bracket.
It is recommended that you figure your taxes both separately and jointly, and then choose the filing status that will most benefit you.
Adjust Your Withholding
Just remember, once you’ve tied the knot, you and your new spouse will need to adjust the tax withholding from your paychecks.
Once you determine your number of allowances, you can divide them however you choose between you and your spouse, recognizing that each allowance is worth more to the higher-earner in terms of reduced withholding and increased take-home pay .
Don’t make the mistake that many working couples do. Working spouses usually need to worry more about under-withholding than about over-withholding. The Form W-4 instructions include a worksheet that will walk you through the process of eliminating allowances. Your goal is to match your withholding with the amount you'll actually owe for the year, so you get neither a big tax refund nor a nasty tax surprise when you file your return.
Coordinate Fringe Benefits
You and your spouse should draw up a list of the tax-favored fringe benefits at each of your workplaces. If you can be covered by your spouse's medical plan, for example, maybe you can trade your coverage for another benefit.
Inform the Social Security Administration of Your Name Change
Did you change your name when you got married? If you did, it's important to inform the Social Security Administration of the name change (this will also update the IRS records). You can update your name by filing a Form SS-5, Application for a Social Security Card. If the name on your tax return does not match the name the Social Security Administration has on file for your Social Security Number, any tax refund will be delayed until the discrepancy is resolved. If you did not change your name with the Social Security Administration before the filing deadline, you can file a joint return with your spouse using your old name (the one that matches your Social Security Number) and then file the SS-5 before next year's filing season.
Selling Your House
The amount of home-sale profit that can be tax-free doubles from $250,000 to $500,000 once you are married. This assumes that you own the house and have lived in it for at least two of the five years prior to the sale. But what if your spouse sold their house before the wedding? The $250,000 limit still applies just as if they were still single. What if they sold the house after the wedding? Then $250,000 of the profit on the sale of the home can be tax-free.
Change of Address
If you have moved to a new permanent address with your spouse, remember to update your address with the IRS and with the U.S. Postal Service. You can change your address with the IRS by filling out Form 8822, Change of Address, and mailing it to the address on the form. You can change your address with the Postal Service by visiting your local post office.
Report Changes in Circumstances and Update Your Premium Tax Credit
If you buy health insurance from the Marketplace and receive advance premium tax credit payments, you should report your marriage (and other changes in circumstances such as income, birth of child, new job, home purchase, etc.) to the Health Insurance Marketplace. This will allow the Marketplace to update your premium tax credit amount, as well as help you avoid owing money or getting a smaller refund that you do not expect when you file your tax return.
Related Tax Topics:
More about filing a joint return
More about filing separate returns
Not responsible for your spouse's tax debt? Find out about innocent spouse relief
Learn about family and home-related tax credits
Find out about the tax implications of divorce and separation
See if you qualify for other tax deductions
Use our Free Tax Tools including our Tax Calculator!