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14 February 2018

Love and Marriage and Taxes

Love and Marriage and Taxes

In celebration of Valentine’s Day, let’s look at how marriage affects taxes. After all, taking a closer look at how marriage can save tax dollars can be quite heartwarming.

Once a couple ties the knot, checking “married filing jointly” on the tax return is usually the best option over “married filing separately.” That’s because filing jointly typically brings with it several tax incentives that aren’t available to separate filers including certain child and dependent care, education, and earned income credits and a much lower exemption amount on the alternative minimum tax (AMT).

Texas is a community property state as well (as are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington, and Wisconsin). So, even if you decide to file separately, each spouse is generally required to report half of the other spouse’s earnings/income and deductions, income tax withholdings, and estimated tax payments anyway.

If you’re worried about the so-called “marriage penalty” for joint filers who get catapulted into a higher tax bracket, there’s good news: The penalty rarely applies to most couples. What’s more, it’s eliminated for the 2018 filing season (next year) for everyone but those who earn a combined $400,000 or higher.  So unless you both earn equally substantial incomes, joint filing is likely your best route.

If you both own homes and plan to sell one (or both) when you marry, you may qualify for the biggest wedding gift from the IRS yet: up to $500,000 in tax-free profit from the sale. Plenty of restrictions apply—including restrictions on how long you lived in the home and whether you both lived there for a period of time—but be sure to look into the opportunity if a home sale is a part of your newlywed plans.

To help ensure filing with the IRS goes smoothly after the wedding, take the following steps as soon as you say, “I do”:

With so much to consider, it’s worth sitting down with a tax professional once you tie the knot. Contact us for help…and, congratulations!

Image Copyright: prostooleh / 123RF Stock Photo


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