For Better or Worse: Marriage Can Affect Your Tax Status in Positive (And Negative) Ways
Most people don’t have taxes on the brain when they decide to settle down permanently with their romantic partner, but that doesn’t mean your nuptials won’t affect your tax standing.
To mark Valentine’s Day, we’d like to share with you the many tax benefits (and a few potential drawbacks) of tying the knot as well as some helpful information about maximizing your refund or minimizing your tax liability. If your tax filing status has recently changed and you’ve got questions, please contact S.H. Block Tax Services for help.
Updating Your Tax Status After Matrimony
Once you’re officially married, you’ll need to make several changes to your tax status to file accurately with the IRS and the State of Maryland. If you changed your last name when you got married, you’ll need to report the name change with the Social Security Administration by completing and filing Form SS-5. And if you move in with your partner and change your address, you should complete and submit Form 8822 to notify the IRS of this change.
In addition to those routine changes, you’ll also want to update your tax withholdings and your filing status. To update your withholdings, you should complete a new Form W-4 and file it with your employer or human resources manager. If you and your new spouse are both employed, you should check to see if your combined income might place you in a higher tax bracket.
You should also consider updating your filing status once you’re married, as it could affect your tax liability, filing requirements, and even your potential eligibility for numerous deductions and credits when you file your annual income taxes. Keep in mind that if you got married at any point during the year for which you’re filing, the IRS considers you married for that entire year regardless of whether you were married for 12 months or 12 days.
While there are five different tax filing statuses, only two apply for married couples. (Note: nonresident aliens must file separately.)
Married Filing Jointly
Couples who file jointly must combine their income and their deductions. In most cases, couples who file jointly enjoy less tax liability because their standard deduction is higher and they’re eligible to receive additional tax benefits.
Three important things to keep in mind if you’re considering filing jointly with your spouse:
- You may file jointly even if your spouse has no income or deductions.
- Both spouses are responsible for the information on their joint return, which could potentially lead to significant legal or financial problems if the information isn’t accurate. (If you find yourself in a difficult situation based on your spouse’s reporting, you should hire a skilled tax resolution attorney and file for innocent spouse relief.)
- If your spouse has pre-existing tax issues, these problems should not affect your tax standing or your decision about whether to file jointly. Whichever spouse does not have pre-existing tax issues should inquire about injured spouse allocation.
Married Filing Separately
Sometimes couples are better off filing separately, especially if one spouse believes the other is filing inaccurate or fraudulent returns or if one spouse isn’t having enough taxes withheld from their paychecks. Also, if one spouse had significant medical expenses or other limited deductions, filing separately could result in less taxes overall.
In general, however, couples filing separately usually pay more in taxes. Separate filers often miss out on credits and deductions only afforded to joint filers. And when filing separately, only one spouse may claim the couple’s child as a dependent. Also, when filing separately, if one spouse itemizes their deductions, the other spouse can’t claim the standard deduction.
Unmarried domestic partners are not recognized as married on their federal taxes and should file as “single” or “head of household.” Same-sex couples who are married must file as one of the two “married” classifications.
The Tax Advantages of Marriage
Depending on your financial situation and how you to choose to file, there are several benefits to married filing status.
- Tax write-offs: If one spouse has a failing business or is otherwise losing money, the more profitable spouse can use those losses as a tax write-off when the two file jointly.
- Retirement accounts: An unemployed spouse can contribute to an individual retirement account, and retirement benefits phase out at a higher point for married couples.
- Childcare benefits: If one or both spouses have minor dependents in need of childcare, the spouses may be able to claim special childcare deductions and credits.
- Estate protection: If one spouse chooses to leave their income and assets to their surviving spouse if they die, this action won’t generate estate tax.
These are just a few of the many tax advantages of marriage, and there are also potential disadvantages depending on your unique circumstances. To learn more, you should contact a skilled and experienced tax resolution attorney for a free consultation.
Contact S.H. Block Tax Services for All Your Tax Needs
If you’ve recently gotten married or entered into a domestic partnership, S.H. Block Tax Services is here to help you navigate potential tax issues. Our attorneys and support staff have decades of tax resolution and filing experience, and we’ve earned an A+ rating with the Better Business Bureau for our years of service on behalf of Maryland taxpayers.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.