The Internal Revenue Service is many people's financial incubus. It scrutinizes your financial life, shrinks your paychecks or even worse, sucks you dry with exorbitant tax penalties. Fortunately, the IRS is not always merciless. If you are married, you may be able to look at this feared organization in a different light. In fact, the IRS generously offers annual "wedding gifts" to those who have tied the knot. Besides your marital status, however, your filing status also plays a crucial role in determining your eligibility for these tax blessings. In order to take full advantage of these marriage tax deductions and benefits, you need to file jointly.
Income Tax Shelter
Joint filing is especially helpful when one spouse makes significantly more money than the other. If you're the higher earning spouse, your partner can be your tax shelter which will bring you into a lower tax bracket and minimize your tax liability. It's true that no one really wants to see their partner lose money in a business or make so little income, but one spouse's financial hardship can be the other's tax silver lining.
Home Sale Tax Break
Home selling is a serious business for wedded couples and bachelors alike. Regardless of your marital status, the money you make from selling your property is considered a taxable income. In the eyes of the IRS, however, those who say "I do" and file their taxes together deserve a little more leniency. If you and your spouse lived in the property for at least two of the five years prior to the sale date, you can exclude up to $500,000 in sale profits from your taxable income. Single home sellers, on the other hand, are qualified for only up to $250,000 of home-sale tax exemption. That is indeed 50% less than the amount married couples are entitled to.
IRA Contribution Deductions
Making contributions to an individual retirement account (IRA) can lower your taxable income while putting away a good amount of money for your retirement. For married couples filing jointly, the income limit at which the IRA deductions are phased out is substantially higher than those of single taxpayers and married couples who file separately. Even a spouse who is unemployed or cannot afford an IRA on one's own can use the joint income to fund one and receive full tax benefits.
The IRA Contribution Phase-Out Limits
|Filing Status||Phase-Out Limit in 2012||Phase-Out Limit in 2013|
$58,000 - $68,000
$59,000 - $69,000
Married Filing Separately
$0 - $10,000
$0 - $10,000
Married Filing Jointly
$92,000 - $112,000
$95,000 - $115,000
Charitable Contribution Deductions
Most people make charitable donations out of kindness and don't expect anything in return. Yet, the IRS doesn't want such good deeds to go unnoticed and is willing to reward benevolent donors with some tax write-offs. Charitable contributions to qualified organizations are indeed tax deductible. The limit to the amount of deductions you can claim each year is determined by your income. For most taxpayers, the deduction for charitable contributions is limited to 50% of their adjusted gross income, yet in some cases, 20% and 30% limits may apply. If you're married and filing taxes jointly, you can combine your spouse's income with yours and accordingly increase the limit on your charitable contribution deductions.
Other Tax Credits and Deductions
There are some other tax advantages available only to joint filers, such as the Hope and Lifetime Learning credit as well as student loan interest deductions. The child tax credit is applicable to all married taxpayers, whether they file jointly or separately. However, the filing status does affect how the phase-out limit is determined. The phase-out begins at $110,000 for married couples filing a joint return, and $55,000 for wedded taxpayers filing separately.
When Should Married Couples File Their Tax Returns Separately?
Separate tax filing isn't only for married couples who are actually separated. Some happily married couples have good reasons not to file their taxes jointly. For example, a spouse may have substantial medical bills and can meet the threshold for medical deductions by considering his or her income only. In addition, joint filing holds both spouses equally accountable for all tax liability. If some of your spouse's tax claims don't sit well with you, you may choose to file your tax returns separately to avoid tax penalties that may arise.
Looking for More Tax Advice?
- Self-Employed Tax Tips - Commonly Overlooked Tax Ded...
A list and detailed discussion of self-employed tax deductions that many taxpayers might overlook!
© 2013 Om Paramapoonya
smcopywrite from all over the web on May 18, 2018:
I was very pleased to see an article like this. It seems like married couples got short end of the stick when it comes to taxes.
There is more deductions for single folks or those eligible for head of household.
Getting married in the middle of the year was always a let down come tax time. This is strangle since nine out of ten couples choose the wedding between may and august. This generally means taxes are based on single filing info more than half of the year.
Wonderful info and again extremely positive. Easy to follow and well written. Thanks. I learned something new and valuable.
Om Paramapoonya (author) on January 30, 2013:
@akirchner - Yep. So.....stay with Bob! lol
@stephhicks - Thanks, Steph. My husband and I have been married for just about a year. It will be our first joint filing, so I felt like I should do some research and share the info here!
Stephanie Marshall from Bend, Oregon on January 28, 2013:
Very instructive! My husband and I have been filing jointly for years, so I haven't directly considered the benefits of marriage and taxes for quite some time. Well done - and just in time for tax season. :)
Audrey Kirchner from Washington on January 28, 2013:
Great points, Om--one of the other pluses of being married I guess~
Om Paramapoonya (author) on January 28, 2013:
@prasetio - You're very welcome, Pras. Glad you found these marriage tax tips interesting!
prasetio30 from malang-indonesia on January 27, 2013:
Very informative hub. I had never heard about this before reading this hub. My sister, thanks for writing and share with us. I learn something new here, maybe I live outside US. Thank you very much. Voted up!