Getting married is not just about love and commitment; it also comes with a whole set of tax implications that can surprise even the most financially savvy duo. If you and your future boo make a combined ~$250,000, then you fall into the 24% tax bracket, according to the IRS. And that’s just for the Federal taxes! Don’t forget about the state taxes! As you can see, there is much more beyond the romance of the ‘I Do’s’–there are significant tax implications that couples should be aware of. Let’s dive into the specifics so you’re not left in the dark.
A quick example of the implications of filing taxes jointly vs. individually
Before we dive into the complexities of taxes (yay!), we will use an example to demonstrate how filing taxes jointly versus individually works. Take Mike and April. Mike makes $40,000, and April makes $60,000, so together they make $100,000. If they file taxes individually, each of them will be taxed according to the IRS’s single tax bracket. For example, Mike might be taxed at 12% for his income, and April might move into a higher tax bracket and be taxed at a higher rate for some of her income.
However, if they file taxes jointly, their combined income of $100,000 is taxed according to the IRS’s married tax bracket. This bracket has wider steps, meaning more of their income is taxed at lower rates before moving to higher rates. For instance, if the 12% tax bracket for single filers applies to income up to $44,725, it might apply to income up to $89,450 for joint filers.
So, filing jointly results in a lower overall tax bill for Mike and April compared to filing separately, where each of them might reach higher tax rates more quickly. Note that combining income can sometimes push a couple into a higher tax bracket, resulting in more taxes. For instance, Sarah and John each make $85,000 a year. If they file separately, they each fall into the 22% tax bracket for single filers. However, filing jointly combines their income to $170,000, pushing a significant portion into the higher (24%) bracket. This increase in their marginal tax rate means they might pay more in taxes together than they would separately.
Is it a tax benefit or a tax penalty to get married?
When it comes to taxes, getting married can be both a blessing and a curse. Let’s take a look at the concept of marriage bonuses and penalties in a simple way.
Marriage Benefit
Couples may pay less tax together than they would as singles if one partner earns significantly more, resulting in more of their income being taxed at a lower rate tax bracket. Jane and Mark are married, and together, they earn $100,000 a year. By filing their taxes jointly, they get a higher standard deduction, which means a larger portion of their income is not taxed. Additionally, they benefit from wider tax brackets, which means that more of their combined income is taxed at lower rates.
Marriage Penalty
If both partners have similar incomes, they may face a higher tax bill together than as singles if they’re pushed into a higher tax bracket. Consider Tom and Lisa, each earning $50,000 annually. Individually, they would be taxed based on single filer brackets.
If Tom and Lisa file separately, their $50,000 incomes would likely fall into a lower tax bracket, such as the 22% bracket for singles $47,151 to $100,525. However, filing jointly with a combined income of $100,000 could push them into a higher tax bracket for married couples.
Choosing which filing status to use
Your tax filing status changes after marriage, and it’s crucial to understand your options. There are 5 options to choose from:
- Single: This option is for people who are not married, so skip this one if you are planning to get married soon (or are already married).
- Married Filing Jointly: Most couples choose this status, which often provides the best tax benefits, such as higher income thresholds for deductions.
- Married Filing Separately: This might be beneficial if one spouse has significant medical expenses or miscellaneous deductions.
- Head of Household: Generally not available after marriage, but there are exceptions for certain situations like separation.
- Qualifying Surviving Spouse: If your spouse has passed away recently (within 2 years) and you have a dependent child.
Your filing status impacts several key aspects of your tax situation. It determines whether you need to file a tax return, influences the amount of tax you owe, affects your eligibility for tax credits, dictates the type of tax form you should use, determines your standard deduction amount, and can impact whether you receive a tax refund.
How a prenup can affect marital taxes
With a prenup, you can actually dictate which status you file during marriage. For example, you can include a clause that states whether or not you will file jointly or separately while married. You can also include more detailed matters, such as who will be responsible for filing the taxes and who will pay the taxes.
The ability to dictate filing status in a prenuptial agreement is a powerful tool for managing your marital taxes. By deciding upfront whether you’ll file jointly or separately, you can proactively plan for potential tax implications and optimize your financial strategies.
How does marriage change tax deductions?
Marriage can significantly alter your tax landscape, influencing both deductions and credits. For starters, what is a standard deduction/tax credit? In a nutshell, tax deductions lower your taxable income, while tax credits directly reduce the amount of tax you owe.
So, how does marriage affect this? One of the most notable changes is the standard deduction. When you’re single or married filing separately, you’re limited to a specific amount to reduce your taxable income. However, marrying and filing jointly essentially doubles this deduction, potentially shielding a much larger portion of your combined income from taxation.
For example, the standard deduction for single filers in 2025 is $15,000. But for married couples filing jointly, that number jumps to $30,000. This substantial increase can lead to significant tax savings, especially if you and your spouse have comparable incomes. However, it’s important to note that if one spouse earns considerably more than the other, the tax benefit might be less pronounced.
How does marriage affect tax credits?
As for credits, the Child Tax Credit is a substantial benefit for families, but it can become more nuanced. Eligibility and the amount you can claim may shift based on your combined income, impacting your overall tax liability. For example, the Smiths have two children under the age of 6. Their combined income is $80,000, making them eligible for the full Child Tax Credit. In 2025, the credit is worth $2,200 per child, so the Smiths could potentially receive a total credit of $4,400. This credit can be claimed when they file their taxes, either reducing their tax bill or resulting in a larger tax refund. This extra money can help the Smiths cover childcare expenses and educational costs or even contribute to their savings goals.
Education credits, like the American Opportunity Tax Credit (AOTC), are similarly affected. Income thresholds for eligibility change once you’re married, potentially limiting access or reducing the credit’s value. Let’s say a married couple, the Johnsons, are filing their taxes jointly. Their daughter, Sarah, is a college freshman. The Johnsons paid $15,000 in tuition and fees for Sarah’s first year. They meet the income requirements for the AOTC, which allows a maximum credit of $2,500 per eligible student.
This credit helps the Johnsons offset a significant portion of Sarah’s college expenses, making higher education more affordable for their family. It’s important to note that the AOTC has specific eligibility requirements, such as enrollment status and income limits, so it’s crucial to consult the IRS guidelines or a tax professional to determine if you qualify.
Marriage, estate planning, and taxes (Oh my!)
The last thing on your mind when planning a wedding is planning for death. However, it’s key to understand the implications marriage has on estate taxes to make sure you and your partner are both protected in any scenario.
- Unlimited Marital Deduction: This tax provision allows for the unlimited, tax-free transfer of assets between spouses, either during their lifetime or upon death. This means you can give your spouse a valuable asset like a house or stock portfolio without incurring any gift or estate tax. However, it’s important to remember that whoever ultimately owns the asset when they pass away will be responsible for any potential estate taxes.
- Gift Tax Exemption: In addition to the unlimited marital deduction, you can also gift your spouse an unlimited amount of assets during your lifetime without triggering gift taxes. This provides flexibility for estate planning and wealth transfer strategies.
- Estate Tax Threshold: Married couples enjoy a significant advantage when it comes to estate taxes. The current federal estate tax exemption for 2025 is $13.99 million. This means a married couple can pass on a substantial estate to their heirs without incurring federal estate taxes.
What it all boils down to
Navigating the tax implications of marriage can feel like a challenging journey, but understanding these key areas will set you and your spouse on the path to making more informed decisions. Just like any good partnership—whether it’s Thelma and Louise or Chandler and Joey—communication and strategy are key. For more detailed guidance, and to find out the nuances related to your unique situation, be sure to consult the IRS website or speak with a tax professional who can provide you with personalized advice.
Laura Tynan is the founder of The Witch of Wall Street, a personal finance and investing community, where women are shown how to manage, multiply and manifest money, using simple strategies. Laura holds a BSc Hons in Finance, is a Chartered Accountant, and is certified in EFT Tapping, Breathwork, and RRT. She has been recognized by the Financial Times as a Top 20 Future Female Leader and by Yahoo! Finance as a Global Champion of Women in Business. She is a multi-award-winning speaker who has spoken at, and been featured in, Forbes. Laura hosts The Witch of Wall Street podcast and is the author of the personal finance and investing book for women, by the same name, which is available now on Amazon.
0 Comments