Joint filing requirements in the past have been met with some backlash. Historically, when spouses were at similar income levels they could be pushed into a higher tax bracket than they normally would if they filed individually. Congress took measures to reduce this “marriage penalty” by ensuring that the tax bill would be closer to the amount that they would have owed as single taxpayers. While there are still some negative tax implications for getting married, there are also many tax benefits that you can take advantage of.
Reduced Income Tax
If a spouse is in a high income tax bracket and the other is in a much lower bracket, their income together while filing jointly is taxed at a rate somewhere in the middle. This typically results in a lower total tax than they would pay as two single taxpayers.
Tax Deductions from Spouse’s Losses
While losing money is never a tax strategy that is advisable, if you or your partner has taken a loss, there are deductions that can be taken advantage of to offset the situation. The spouse who is making money may use those business losses as a tax write-off.
Retirement Savings Benefits from Jobless Spouse
In contrast to filing as a single person, there is a much higher cap on income level as a married couple when taking advantage of individual retirement account (IRA) benefits. Furthermore, an individual that originally could not put money away for an IRA can use joint income to fund one and save thousands for retirement.
The Perfect Combination of Benefit Packages
Couples have the opportunity to select which components of their benefits package they prefer and create a perfect combination to suit their financial situation.
Greater Charitable Contribution Deduction
As a single taxpayer, there is a limit to the deductions gained from charitable contributions. As a couple filing jointly, that limit is raised. If one of them makes a very large donation but does not have income of at least double that amount, the excess contributions are deducted the following year
Protection of Assets
Under the federal law, you are able to leave any amount to the spouse without generating estate tax. This exemption protects the deceased’s assets until the spouse dies.
Time Saved on Filing Taxes
Simply put, you will likely save time on completing your income taxes when there is only one to file.
Greater Income Exclusion of Personal Residence Gains
If your home rises in value while filing individually, you can only qualify to exclude $250,000 in gain from your income. On the other hand, if you are married and filing jointly, you are able to exclude up to $500,000.
Unlimited Gift Giving
If your significant other, who you are not yet married to, gives you more than $14,000 in gifts, you are required to file a gift tax return. However, after you are married, gift tax returns are not required regardless of the amount gifted over.
A Financial Resource
Last but not least, your spouse can be seen as a resource to aid your tax filing. While you or your spouse may not be a financial expert, chances are you have both filed taxes before in the past. Filing your taxes jointly means that both you are your significant other can sit down together and be a resource for one another as you tackle a project that may be tedious and not all that much fun.