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9 Things The IRS Doesn’t Want You To Know About Getting Married

by Tracey Hrica, EA Jul 03, 2020 | Share

IRS wedding rings form 1040

Well, some of them they do, some of them they don’t advertise. That’s why talking to your accountant should be part of your wedding planning.

New life developments can be exciting, but they also change every aspect of your finances.

When you experience a life-changing event, your cash flow and tax bracket are probably the last things on your mind. Consulting an accountant during significant life changes can prevent common mistakes and set you up for success with your finances in marriage.

So, let’s talk about marriage. Did you know 2.3 million couples wed every year in the U.S.?

wedding marriage love heart hands

Hopefully, the majority of these couples married for true love and compatibility. Still, some of these tax breaks might have made tying the knot seem a little more appealing.

Your tax bracket could be lower. 

If the taxpaying spouses have substantially different salaries, the lower one can pull the higher one down into a lower bracket, reducing their overall taxes.

Tax shelter?

Let’s say one spouse is losing money in a business. Alone they may not be able to take advantage of some deductions. But, combine that with the income of a spouse who is making money, now those deductions may be available, and the loss could be a potential write-off.

Marriage can protect the estate.

Being married can help a wealthy person protect the assets they leave behind. Under federal tax laws, you can leave any amount of money to a spouse without generating estate tax. So this exemption can usually protect the deceased’s estate from taxation until the surviving spouse dies.

So, let’s go back to the love and compatibility scenario. Filing your income tax return with the IRS can be quite the hassle. For newlyweds, especially, there is a lot to consider—most importantly, deciding whether to report your income together or separate.

A newly married couple has two choices for their filing status:

  • Married filing jointly
  • Married filing separately

There are many advantages to filing a joint tax return with your spouse.

The IRS gives joint filers the most substantial standard deductions each year($24,800 in 2020), allowing them to deduct a significant amount of their income off the top.

Joint filers receive higher income thresholds for various taxes and deductions. They can earn a more substantial amount of income and potentially qualify for certain tax breaks.

Couples are eligible to file a joint return as long as they are married by December 31st, the last day of the tax year. For example, you can file a 2020 joint return in April 2021 as long as you were legally married by December 31st, 2020.

Couples who file separately receive few tax considerations and are subject to a few consequences.

Separate tax returns may give you a higher tax with a higher tax rate. The standard deduction for separate filers is far lower($12,400 in 2020) than that offered to joint filers.

Filing a separate return from your spouse disqualifies you from several tax breaks and deductions such as:

  • The child and dependent care tax credit
  • The adoption credit
  • The Earned Income Credit
  • Tax-free exclusion of U.S. bond interest
  • Tax-free exclusion of Social Security benefits
  • The credit for the elderly and disabled
  • The deduction for college tuition expenses
  • The student loan interest deduction
  • The American Opportunity Credit and Lifetime Learning Credit for higher education expenses
  • Traditional IRA deductions
  • Roth IRA contributions
  • The capital loss deduction limit is $1,500 each when filing separately, instead of $3,000 on a joint return.

However, there are some cases in which to consider married filing separetly.

Filing a separate married return provides relief from joint liability. Each spouse is only responsible for the accuracy of their separate tax return and the payment of any separate tax liability.

Here are some situations in which filing separately may be advantageous:

Filing separate generates the same tax.

In this case, filing separately achieves the goal of maintaining separate responsibility for the accuracy of the returns and the payment of tax but without any additional liability.

Consent.

One spouse is unwilling or unable to consent to file a joint tax return.

Tax Fraud. 

One spouse knows or suspects that the other spouse is omitting income or overstating deductions, and that spouse doesn’t want to be held personally liable for the other spouse’s tax or misrepresentations.

Head of Household.

The spouses live apart, and at least one spouse would qualify for head of household filing status if they didn’t file together.

Child Support.

One spouse owes child support. Filing separately can protect one spouse’s tax refund against the other’s creditor claims.

Experts recommend preparing your taxes both ways to determine which option makes the most financial sense for you if you’re unsure what’s best for your situation.

So, should you speak to your accountant before you get married?

Absolutely! Everyone’s tax situation is different and can be complicated. In most cases, the financial benefits of filing a joint tax return will outweigh filing separately. Still, it is essential to know and understand.

If you found this post helpful, here are a few more you might enjoy:

Working From Home – Can I Take a Tax Deduction?

Don’t Forget – Unemployment Benefits are Taxable

Spread the Word to Protect Your Loved Ones from COVID-19 Related Scams

Have a Large Tax Bill? Is Your Refund Not What You Expected? The New W-4 May Be Your Savior.

About the Author

Tracey Hrica, EA

Tracey Hrica joined the firm in 1995 as a bookkeeper. In 2012, she earned the designation of Enrolled Agent(EA), which enables her to prepare personal and business tax returns and represent clients before the IRS. To maintain the designation of EA, she must complete yearly continuing education in the areas of personal and business taxation. Working closely with her clients, Tracey’s primary areas of concentration are new client onboarding, client communication, research, and QuickBooks support. As a QuickBooks ProAdvisor, she works closely with clients who rely on QuickBooks for the day to day running of their business. Tracey has expertise in both QuickBooks Desktop and QuickBooks Online.

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