Getting Married > Taxes When Uncle Sam Puts a Ring On It: Marriage and Taxes

Team PV

“Are there tax pros and cons to putting a ring on it?”

You may wake up the day after your wedding and not feel any different. But Uncle Sam noticed your change in marital status. Let’s walk through three of those changes:

Filing Status

You’re done checking off that Single box on Form 1040. You’ve got two Married choices, but which one is right for you and your new spouse?

Married, Filing Jointly Pros:

  • Larger standard deduction
  • Claim 2 exemptions
  • See immediate results on your tax bill

  

Married, Filing Jointly Cons:

  • Combined income = higher tax bracket
  • Eligibility for credits like Child Tax Credit phases out with higher incomes
  • If filing spouse makes mistake on joint return, you’re both on the hook for it.

 

Married, Filing Separately Pros:

  • If you and your spouse have very different incomes and you’re guaranteed a return
  • If one spouse’s tax situation is more complicated than the other’s
  • Potential audits = individual gets audited, not the couple

 

Married, Filing Separately Cons:

  • If your spouse itemizes deductions, you can’t claim standard deduction
  • Claimed credits- like Earned Income Credit- are reduced by half

 

If you use tax software like TurboTax, you can quickly run through both scenarios and see what will make the most financial sense for you. For most couples, it literally pays to file jointly. 

The “Marriage Penalty”

Before you toast to that extra income, yes, the marriage penalty is real. If the marriage bonus includes a lower tax bill and a larger return, the marriage penalty is ponying up more income tax than you normally would have if filing as single. That union of income is sometimes just enough to push you and your spouse into the next tax bracket. 

Unfortunately, the penalty kicks in most often when combining two similar incomes at the low and high ends of the income spectrum. So unless you and your spouse both earn $10,000 or $200,000 each, you’ll fall somewhere in the middle and take home a refund.  

Ouch. At least we don’t have dowries anymore.

Marital Estate Perks

It’s just a fancy way for the IRS to say, “What’s mine is yours.” If you score a winning Mega Millions ticket before you pass away, you can transfer all your assets to your spouse without paying the federal estate tax or gift tax. Huzzah for that ball and chain!  

 

Photo: Kirill Kondratyev

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