- Once you’re married, you have the option of filing a joint tax return with your partner.
- Whether a joint return raises or lowers your taxes will depend on you and your partner’s unique financial situation.
- Outside of changes in the tax rate, you become eligible for other tax benefits when you file jointly.
- You might want to talk to an accountant or financial advisor to determine the best method for your family.
A lot of things change when you get married, and your taxes are no different. While some countries tax everyone as an individual, regardless of their marital status, here in the United States married couples have the option to file jointly—that is, as a pair.
For a lot of couples, that means they save money on their taxes; though that’s not always the case, especially when both partners are high earners. Filing jointly also makes you eligible for new credits, deductions, retirement savings and estate planning options.
Here’s a look at how your taxes change, why taxes differ for couples filing jointly and whether or not you should file a joint return with your partner.
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How do your taxes change after marriage?
“Couples who file together can usually qualify for multiple tax credits,” says Daniel Rahill, CPA, JD, managing director of Chicago-based Wintrust Wealth Management. These include:
Earned Income Tax Credit
This is a credit for workers and families making under $57,414 and meeting a few other standards. However, if you’re married filing separately, the rules become a little more complicated—you must have either lived apart from your spouse for the last six months of 2021 or be legally separated according to your state’s laws.
American Opportunity Tax Credit
This is a credit for up to $2,500 to help cover educational expenses for eligible students. You aren’t eligible if your modified adjusted gross income (AGI) is over $90,000—but that number goes up to $180,000 for joint filers. It may be worth it to file jointly if your spouse’s income is lower than yours and would make you eligible.
Lifetime Learning Credit
This is a credit for tuition and related education expenses worth up to $2,000 per tax return. You can claim it for yourself, your spouse or a dependent whose educational expenses you’re paying. This is another situation in which filing jointly may help you qualify as you can’t claim this credit with $69,000 or more in modified AGI, as that number goes up to $138,000 for married couples filing jointly.
Child and Dependent Care Credit
This credit is intended to help offset the expenses of caring for eligible children and other dependents. Taxpayers with AGI of $438,000 or less are eligible for a $4,000 credit for a single dependent or an $8,000 credit for two or more. However, married couples have to file jointly to qualify—some separated couples may be able to file separately and still receive the credit but they would have to meet certain standards.
Credit for Adoption Expenses
This credit helps cover adoption expenses, though it doesn’t apply to adopting your spouse’s child. This is another credit where it’s more difficult to apply if you’re married filing separately. According to the IRS, “If you filed your return using the married filing separately filing status in the year…qualified adoption expenses are first allowable, you generally can’t claim the credit or exclusion for those particular expenses.”
Married couples filing jointly also see different deductions. “Joint filers receive higher income thresholds for certain taxes and deductions,” Rahill explains. “This means they can earn a larger amount of income and still potentially qualify for certain tax breaks.”
The standard deduction for separate filers is half that offered to joint filers. In 2021, married taxpayers filing separately were eligible for a standard deduction of $12,550 compared to the $25,100 offered to those who file jointly.
Tip: A deduction reduces the amount of your income that’s taxable. The standard deduction is set annually and will depend on your income, age, filing status and other factors. If you can’t use the standard deduction or can save more money itemizing your deductions, you can calculate your deduction that way, which means you will need to list out every eligible amount, including state and local taxes, real estate taxes, mortgage interest, charitable contributions, medical expenses and more. An itemized return is a lot more work, but can be worth it. You’ll need to do the math.
There’s a larger deduction for couples when it comes to charitable giving too. If you’re filing separate returns, you can only claim up to $300 but if you’re married filing jointly that number goes up to $600. Before 2021, couples were limited to $300 as well.
“If you file a separate return from your spouse, you’re disqualified from several of the tax deductions and credits available to couples filing jointly,” says Rahill. “For instance, married taxpayers filing separately can’t take the deduction for student loan interest and their capital loss deduction limit is halved.”
Other tax benefits
Married people often also qualify for enhanced retirement and estate planning benefits. They can also leave any amount of money to each other without triggering estate taxes.
And if you’re married filing jointly, are younger than 50 and you as a couple make less than $204,000 in modified AGI, you can contribute up to $6,000 to your Roth IRA in 2022. Meanwhile, if you’re married filing separately and lived with your spouse at any point in the last year, you can’t contribute to a Roth IRA.
Tip: A Roth IRA is different from a 401(k) plan. With a 401(k) plan, the money you put in isn’t taxed, but withdrawals are. A Roth IRA works in the opposite way: You put after-tax dollars in your account, but don’t incur taxes when you withdraw it as long as you meet certain qualifications.
Rahill says that almost all married couples file jointly—considering the list of benefits, it’s easy to see why. That said, there are some situations where couples filing jointly might see negative effects.
A marriage penalty is when two married people end up paying more income tax filing jointly than they would not getting married and filing individually. A marriage bonus, on the other hand, is when they pay less in the same situation.
Whether you and your partner get a marriage penalty or bonus will depend on a variety of factors, but income is one of the most common. Couples with similar incomes are more likely to see a penalty and a higher tax rate, where couples with only one high earner will likely see a bonus as that higher income is now divided between two people, shifting them into a lower tax bracket.
Generally speaking, according to the Tax Policy Center, couples are far more likely to see a marriage bonus than a marriage penalty—but this is why it’s important to run the numbers.
Why do married couples get tax benefits?
So, why are married couples treated differently than single people in the U.S. tax system?
According to the Tax Foundation, an independent tax policy nonprofit, the joint filing status was created in 1948. A progressive income tax was signed into law in 1913, meaning that the higher your income, the higher your taxes. Taxpayers began to split income as much as possible to lower their tax rates, often splitting the income earned by one person between two married people to claim a lower tax bracket.
Then in 1930, the Supreme Court ruled that this practice was illegal except in “community property states.” Community property states are states where the law says that anything acquired by one spouse during a marriage is community property of both partners, rather than the one who bought it. While there are obvious downsides to this, after 1930 more and more states began passing community property laws so that their residents could continue to split their incomes and enjoy the lower tax rates.
So in 1948, Congress created the married filing jointly status for all states, negating the difference between community property states and others. In the years since then, the Tax Code has been updated multiple times, making the differences between each filing status ever more complicated.
Is it ever better to file separately?
“In rare situations, filing separately may help you save on your tax return,” Rahill notes. “For example, if you or your spouse has a large out-of-pocket medical expense to claim and the IRS only allows you to deduct that amount if the costs exceed 7.5% of your adjusted gross income as they did in 2021, it might be difficult to claim those expenses if you and your spouse have a combined high income.”
Tip: You can decide whether or not to file jointly or separately on a year-by-year basis. If you’re married, the IRS suggests you do your taxes both jointly and separately each year, determine which gives you the lowest combined tax rate then file with that option.
For example, if you have $10,000 in medical expenses and make $50,000, you would meet that threshold and be able to deduct the amount from your taxes. However, if your partner makes $85,000 and you file jointly, your shared income would be $135,000, disqualifying you from claiming these medical expenses.
“Filing separate returns in such a situation can be beneficial if it allows you to claim more of your available deductions by applying the threshold to only one of your incomes,” Rahill explains.
The benefits of filing separately are a short list and usually turn on a unique situation. Rahill urges taxpayers to do the math: “Filing separately may result in an overall lower tax burden—for example, if there’s a big disparity in their respective incomes and the lower-paid spouse is eligible for substantial itemized deductions. But you really need to run the numbers on this. Don’t assume.”
Tips for filing taxes as a couple
When you’re filing for the first time as a married person, there are a few things to keep in mind beyond choosing to file jointly or separately. Here are three steps the IRS encourages:
Update your name if necessary. If you changed your name, you’ll need to update your Social Security card in order to claim any personal exemptions or the Earned Income Tax Credit. Reach out to the Social Security Administration and get that taken care of before you file.
Change your address if necessary. If you moved, make sure you get your refund check and any important communications by updating your address with the U.S. Postal Service and the IRS.
Tip: Update your address with the IRS by calling them, sending a written signed statement or using Form 8822.
Choose the right form. If you have enough deductions to itemize them rather than claiming the standard deduction, you can save money by selecting the right tax form. You can claim itemized deductions on Form 1040—but not Form 1040-A or Form 1040-EZ.
Taxes are never a simple topic. If you feel you’re beyond your depth, reach out to a certified public accountant or certified financial advisor for help making the best decision for you and your partner. They can help ensure you don’t leave money on the table.