Couples who decide to get married usually do not consider the tax implications of marriage until it is time to make their first joint filing. While many couples enjoy tax benefits after they are married, others may face greater tax liability. It is important to consider how marriage affects your tax obligations and liabilities before deciding how to file.
Many people wonder how their marriage date affects their tax filing. For tax purposes, you are considered married for the tax year if the marriage occurred by December 31st of that year. Even if you were only married for one day during that tax year, you can file a joint return for the entire tax year. For marriages that occur from January 1st through the tax filing deadline, the couple will still have to file separately until the following tax year.
Married couples generally have the option of filing as “married filing separately,” or “married filing jointly.” Most couples file jointly; however, there are some cases where filing separately may be preferable. Additionally, even if individuals are receiving support from their parents, after marriage, they cannot generally be claimed as dependents on their parents' tax return.
The so-called “marriage penalty” was largely eliminated after the standard deduction for married couples was changed to reflect double the individual deduction. For the 2016 tax year, the standard deduction for single filers and married filing separately is $6,300, and $12,600 for married filing jointly.
Itemizing deductions may require additional consideration before choosing how to file. If one spouse itemizes deductions, the other spouse cannot take advantage of the standard deduction if they file jointly. The standard deduction for that spouse would reduce to $0. If married and filing jointly, both spouses should itemize their deductions.
Most couples see a lower tax rate after marriage, especially if the couple has a wider difference in income level. Married couples can also double up on a number of tax benefits and exclusions. A single taxpayer can only exclude up to $250,000 in gains from the sale of their home. A married couple can exclude up to $500,000 in gains. Similarly, each spouse can take advantage of a $14,000 gift tax exclusion, allowing them to exclude $28,000 together.
During marriage, spouses can give unlimited gifts to the other tax free. Younger couples may never think about the estate planning implications of marriage; however, marriage allows one spouse's assets to transfer to the surviving spouse tax free upon death.
In order to understand the tax implications of marriage, the couple should consider sitting down and speaking with their experienced San Diego tax attorney or tax professional. It is important for each individual to understand the implications of marriage and understand that they are both responsible when filing a tax return.
Butterfield Schechter LLP is a San Diego County firm focusing its law practice on tax law, estate planning, and business counseling. Our firm can help you and your family identify tax-savings opportunities, avoid tax penalties, and plan for the future. Contact our office today with any questions on how we can help the financial success of you and your family.