On the Tax Benefits of Marriage

For many people, marriage seems like an expected part of life and another one of life’s greatest milestones. While people should marry because of love, there are also other benefits that should not be overlooked. Some of these are financial, such as having two incomes (which is the case for many families); however, these also include the tax benefits that come with getting married. It is important for people to understand these tax benefits so that they can use them to their advantage.

1. Decreasing the Amount of Money Owed

While all of the benefits could potentially fall under this category, getting married does allow people to file jointly. In this manner, if a spouse earns significantly less than the other spouse, this can help bring down the overall tax bracket that the family files under. This means that people will wind up paying less in total taxes than they would if they filed separately. This is one of the biggest benefits of filing jointly as a married couple.

2. Deductions can be Greater

When people claim deductions on their taxes, these can also be significantly more than they would be if the two partners filed separately. For example, if someone was looking to take a loss on their business, they could apply this loss as a deduction to not only their own taxes but to their partner’s taxes as well. This could amount to a significant amount of money and save the family a large amount in taxes. While losing money should not be a strategy when it comes to business management, it can help to save money in personal income taxes.

3. The Gift Tax Changes

For those who file separately, there is a limit on how much one person can give someone else. Any amount over that limit is taxed heavily. When two people are married, they can give each other as much money as they want to without any consequences regarding the gift tax. This also has important implications for the estate tax and inheritance. People should explore this benefit fully before making any decisions.

Some of these benefits can appear confusing; however, there are ways for people to learn more about these tax benefits to ensure that they are using them to maximum benefit. For assistance, it can be helpful to speak with an experienced legal provider about these benefits and so that any and all questions can be answered. Couples should always work with an accountant in the preparation and filing of their tax returns. An accountant can prepare taxes under different scenarios and it can be helpful for a married couple to see what their tax liability or refund will be assuming they file their taxes jointly and separately. Couples will save money by filing jointly in the vast majority of the cases. However, there may be a rare situation when a couple may benefit from filing their taxes separately. That is why it is always a good idea to work with an accountant or other tax professional in preparing one’s taxes.

In reference to the gift tax, it may be a good idea to consult with an estate planning attorney to get guidance. Such a professional can assist a couple getting married or a couple already married on how to structure their assets and possible gifts to financially benefit them and their marriage.

There are tax consequences to getting divorced as well. If one or both spouses are contemplating divorce, it is always a good idea to consult with a family attorney. The family attorney, in conjunction with the other professionals mentioned herein, can provide comprehensive advice and guidance on how best to proceed. For instance, if a couple is going through a divorce, but is still married at the end of the calendar year, that couple has the option to file jointly for that tax year if it is financially beneficial to them. It is advisable to speak with professionals whether a couple will remain married or are in the process of a divorce to get as much information as possible so they can make decisions that are the most beneficial to their particular situation.

Article updated September 28, 2020.