Getting married changes the way you file your taxes, and not always to your benefit. Many people refer to the marriage tax or marriage penalty, for example. But, depending on whether you file jointly or separately, you can also reap marriage tax benefits.
As you begin a family, you might qualify for additional deductions and credits, such as the earned income tax credit, for taxpayers with dependents or children. Understanding this can help you claim every marriage tax credit and benefit for which you qualify.
Tax Tips for Married Couples
Get your financial forever off to a good start by filing taxes correctly and effectively for you and your partner.
Here are 10 tax tips for married couples:
1. Understand the Standard Deduction
- Married filed jointly
- Married filing separately
- Head of household
The standard deduction depends on which filing status you use. For married filing jointly, the deduction is $12,700 for 2017, and the amount is $6,350 if you are married filing separately. Choosing the married filing jointly status might be a good choice even if one spouse is not working because the IRS extends some tax benefits to joint filers that aren’t available to married couples who file individually. This results in a marriage tax break.
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2. Take Advantage of Higher Charitable Contribution Limits
Charitable contribution deductions are generally limited to 50 percent of your adjusted gross income, although the cap is 30 percent for deductions to some private foundations and veterans organizations. The contribution limits are higher for married couples, so if you or your spouse is a large contributor, you benefit by filing jointly. The 2016 limit on itemized deductions — which includes charitable contributions — was $311,300 for couples filing jointly and $155,650 for married individuals filing separately.
Remember to save receipts for your charitable contributions for filing taxes. Charities are required to give you a receipt if you donate more than $75 in cash combined with good and services. Request a receipt for your contributions of goods alone.
3. File Jointly to Deduct Education Expenses
Married students can deduct education expenses, but you’ll need to file jointly to qualify. The credits you might qualify for are the American Opportunity Tax Credit and the Lifetime Learning Credit. The AOTC is worth up to $2,500 of your qualifying education expenses, and because it’s refundable, you can get money back if your credit is more than your total tax liability. The Lifetime Learning Credit is worth 20 percent of your first $10,000 in education expenses, up to $2,000 maximum. The modified adjusted gross income limit for joint filers is $131,000 a year.
4. Use Tax Breaks for High Medical Expenses
You can also deduct qualifying medical expenses from your taxes. You might claim expenses that exceed 10 percent of your adjusted income if you or your spouse are under 65, or deduct expenses that exceed 7.5 percent of your adjusted income if you or your spouse are 65 or older. Keep copies of your receipts, and make sure you only claim qualifying expenses. Qualifying expenses can include doctor visits, hospital stays, physician-ordered weight-loss treatment programs, prescription glasses and prescription drugs.
5. Consider the Marriage Penalty
You might pay a marriage penalty when you file jointly if you and your spouse earn the same amount of income, especially if your earnings are high and you have children. The penalty results from your combined income pushing you into a higher tax bracket. This bump is commonly referred to as the married couple tax. But you might be off the hook for it if one person makes significantly less than the other because tax benefits tend to phase out as income increases — especially if the benefits are related to deductions for children.
6. Examine the Child Tax Credit and Use the Child and Dependent Care Tax Credit
Parents with dependent children might be eligible for the Child Tax Credit. The Child Tax Credit for 2017 is $1,000 per qualifying child, and taxpayers with less tax liability than that might get the remainder refunded to them. The Child and Dependent Care Tax Credit allows you to claim qualifying expenses for child care or dependent care. You can claim a maximum of $3,000 per year for one dependent and up to $6,000 per year for two or more dependents.
7. Take Advantage of the Spousal IRA for Stay-at-Home Parents
You typically must have earned income to qualify for an IRA, but filing jointly lets you open a spousal IRA, allowing the stay-at-home parent to contribute to their retirement savings even if they don’t earn money during the year. The contribution limit through 2018 is $5,500, or $6,500 if you’re 50 or over. You can open either a traditional or Roth IRA, but only traditional IRA contributions are deductible.
8. Know When to File Separately
Despite the tax perks married joint filers receive, filing individually is a better option if it reduces your total tax liability. It can also be beneficial when one spouse has a tax liability for which the other spouse doesn’t want to be responsible, or if one spouse might have a refund seized due to unpaid child support or another debt.
A related consideration is whether to take the standard deduction or itemize your deductions. You and your spouse must file the same way — you both must either itemize or take the standard deduction. Carefully consider this option because you might lose some tax deductions and credits.
9. Consider Using the Earned Income Tax Credit
The Earned Income Tax Credit is one of the tax breaks for married couples with low income. It’s only available to taxpayers who have earned income for the year. To qualify without children, you must make less than $20,430 — but this amount increases with each child you have — and it tops at $53,505 for three or more children. You can claim previous years’ credits if you have not claimed them before by amending those previous years’ tax returns.
10. Factor in the Effects of Divorce on Taxes
Your tax situation is likely to change if you are getting a divorce. Divorcing couples must determine which spouse will claim the Child Tax Credit and the Child and Dependent Care Credit, for example. These usually go to the parent who has custody of the child.
Alimony and child support also affect your tax bill. Alimony payments are tax deductible for the spouse who pays them and they’re taxable income for the spouse who receives them. Child support payments are not tax deductible for the parent who pays them and they aren’t taxable income for the parent who receives them.
Even if you’re married for the full tax year, the IRS might consider separated couples ‘unmarried’ for tax purposes. This essentially creates a married filing single status that makes you eligible to file as head of household if you qualify, thereby reducing your tax rate.
Marriage affects all your finances, including — and perhaps especially — your taxes. Learn how to navigate IRS rules and keep more money in your pocket.
Keep Reading: Here’s Who Claims the Children on Taxes After Divorce
Sabah Karimi contributed to the reporting for this article.