5 Tax Benefits of Getting married
It is often beneficial to file jointly with your spouse, especially if you have different incomes. Many times, getting married and filing jointly with your spouse can bring some nice tax advantages along with it.
At a glance:
Filing jointly can be especially beneficial for couples with disparate incomes.
You can gift as much cash to your spouse as you want without filing a gift tax return.
- Depending on your income, you may be able to qualify for more tax deductions or tax credits when you file jointly.
- Here are five tax advantages married taxpayers may have to look forward to for tax year 2024:
- 1. If one of you earns less, you may pay less total tax. Taxpayers who earn less pay less federal income tax. Their combined income is taxed at an average rate. Filing jointly can give you more tax benefits and deductions. Filing together can get you more deductions and other tax benefits.
For many people, getting married and filing a joint tax return allows for more tax deductions.
As an example, let’s say you have a business loss for the year and no other income. As a single taxpayer, your loss will have little to no tax benefit. While you shouldn’t lose money as a tax strategy, it’s a good tax benefit if you suffer a business loss. While you shouldn’t lose money as a tax strategy, it’s a good tax benefit if you endure a business loss.
Additionally, lower income levels limit deductions and credits when you file as a single person.
Let’s look at another example. You can typically deduct only 50% of your adjusted gross (AGI) income for charitable contributions. If you are a single individual, this means you can only deduct 50% of your AGI for charitable contributions if you do so in a year when you earn less. When you file a joint tax return, your income is combined with your spouse’s. The total amount of the deduction for the same contribution to charity could be higher. This can help you save money on taxes. This is a problem that many individuals face when trying to claim the American Opportunity Tax credit (AOTC) to pay for education costs. But, if you are married filing jointly, these phase-out numbers increase to $160,000 and $180,000, respectively.
3. Filing jointly means unlimited gift giving and rights of survivorship.
If you’re not married and your significant other gives you more than $18,000 in a year (in 2024), they must file a gift tax return. After you marry, however, you can give each other as much as you like with no tax consequences (this is only true if you’re both U.S. citizens).
Likewise, when you die, you can leave as much money as you want to your spouse without generating estate tax. Non-U.S. spouses are subject to special rules and limitations.
4. If you are married, you can double your personal residence gain exemption. If you file jointly, however, you can exclude up to $5000 in capital gains on the sale of your house. If you bought the house before you married and sold it afterwards, only one spouse must meet the ownership requirement. If you bought the house while married but only one name was on the deed, the same rule applies. In this case, however, you cannot exclude the entire $500,000. You must both meet the residency requirements to exclude the entire amount. You can save a lot of cash by filing only one return. This is especially true if you combined a few finances before you got married and you’re used to sorting those out for tax purposes.
Now, as a married couple, filing jointly can greatly simplify the tax filing process — you won’t have to worry about details like who paid the property taxes or if a non-cash charitable contribution was from you or the other person. The IRS will give you a wedding present if you have recently married and gained some tax benefits. There are many tax benefits for married couples, from reducing tax liabilities to simplifying tax filing. Before you file this year, make sure you understand the potential tax advantages available to you when you file jointly vs. separately to help you make informed financial decisions.
TaxAct(r) can help you do this — we’ll ask you interview questions about significant life events, such as a recent marriage. Our tax preparation software will then suggest the best filing status for your circumstances.
