Filing Taxes After Marriage- What You Must Know!

Filing Taxes After MarriageOne of the most common life-changing events is the marriage of a person and when that happens, your financial life will also change on account of tax issues – some positively and some negatively. The Often asked question by a  newly married couple  is “Do you get more income tax being married ?” or “How much less tax do married couples pay?” The answer to both questions is mixed. For some, marriage results in less tax liability , but for some there maybe more tax burden depending upon the circumstances . One thing is sure , getting married will change your life in many ways, including your tax liabilities and tax compliance burden.

What changes after marriage ?

  1. Filing Status– First thing that changes is your status for filing the tax return. Now you can file taxes jointly i.e “married filing jointly ” is the new tax status .
  2. Form W-4 -Second change will be paycheck withholding by your employer. Since you are married , your employer will withhold taxes from your paycheck based on the lower married filing jointly tax brackets, so you will have less withheld from your paycheck and more take home pay. This happens when , you fills out the Form W-4 and submit it to your employer.
  3. Name change- If you want to change your  name after marriage, you must complete SSA Form SS-5, Application for a Social Security Card, or submit your name change application online at ssa.gov. Once that is done, IRS will get it from the SSA  
  4. Address change– One of you may have a change of address , in all probability .If that is so , report change of address to the IRS by filling out Form 8822, Change of Address.

Those two changes are felt in the very first year of marriage as the tax season arrives . Now , let me put a list of marriage bonuses and the marriage penalties as far as taxation of your income is concerned.

Seven Tax Bonus of  Marriage 

1. Filing can take less time and expense

This one is simple: If the spouses have to file just one tax return, there’s a good chance that it will take less time to assemble the paperwork—at least for the one not doing the taxes—and cost less to have it prepared.

2.Greater choice for claiming deductions

Each partner in a marriage can decide who can claim what deduction . So, if the wife earns more , she may claim deductions, allowable medical expenses  including those dealing with the house,  so that her income goes down . The spouse who’s earning less income may not take advantage of some tax relief. This advantage is only available because you are married and the IRC provides you with the facility to file taxes as a couple and pay tax on joint income .

3. Open an IRA without bothering about job

There are two distinct benefits to a married couple as far as  individual retirement account (IRA) is concerned. These are :

  1. You can contribute to the IRA even if you do not have a job. Thus , what you could not do as single , can be done as a couple and potentially put away thousands of dollars for retirement while receiving substantial tax benefits on the joint tax return.
  2. The phaseout limits for IRA benefits  are much  higher for married couples than they are for single people.

4. Employed couples may chose benefits

If both spouses have benefit packages from their jobs, they can chose the  right mixture of benefits from two plans . That can substantially enhance tax savings for them. 

5. Estate Tax Benefit

Under federal tax laws, the tax is levied on your estate but not if the estate is left with the living spouse . Therefore , marriage provides a way to claim exemption from estate tax on the death of one partner by leaving the estate in her living partner’s name.

6. A married couple can get greater charitable contribution deductions

There is a  contribution limit to charity for tax deduction purpose. This limit is based on the total income of a person for the year. Being married, you get higher contribution limit and there fore larger tax deduction.

7. Higher Standard Deduction

Married couple can enjoy a higher amount of standard deduction while computing taxable income. For example , if you check the 2019 tax rate for the Year 2019,  Standard Deductions for  married couple filing a tax return jointly is  $24,400 whereas when they file single can enjoy merely  $12,200 .

Marriage Tax Penalty

The infamous term “marriage tax penalty ” coined to express the unjustified higher taxation for couples having similar incomes than they would have paid if they were single . For instance, if Ron & Lily a newly married couple can have following tax disparity if we compare the total tax outgo on the basis of married vs single tax rate .

Old Tax RegimeTax liability as single
Tax liability as Couple
Ron income $1,50,000$41,616status (Married Filing Jointly)
Lily income $ 1,50,000$41,616
$87,039.00
Total tax outgo $83,232

So, the total tax outgo for the couple Ron & Lily filing taxes jointly was more by $3,806.50 than it would have been if they file as single.

The good news is that the Tax Cuts and Jobs Act, or TCJA, has almost almost removed this infamous “marriage penalty,” . The choice of word “almost” has reasons because now only very high income earning couples will be have to face the “marriage penalty ” .

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