Preparing your annual income tax return for the IRS is a chore — and it can be even more complex when you’re married. You might have two sets of income, assets, debts and deductions. If you were separated, widowed or divorced during the year, you might have an even more complicated tax situation.
For specific tax advice, you should consult a qualified financial or tax advisor. For an overview of some of the most common and significant tax problems married (and divorced) people face, keep reading. Understanding these challenges and finding the best tax deductions for married couples can help you get more tax breaks this year.
Last updated: Jan. 6, 2021
1. What Is My Marital Tax Filing Status for This Tax Year?
When preparing taxes, you first need to determine your marital status in the current tax year, which means you also need to know the correct tax year dates.
The IRS considers you to be married if you were lawfully wed on the last day of the tax year. For example, if you tied the knot at any time in the past and were still married on Dec. 31, 2020, you were married to your spouse for the entire tax year in the eyes of the IRS. The laws of the state in which you live determine whether you were married or legally separated for the tax year.
2. Are Same-Sex Marriages Taxed the Same as Heterosexual Marriages?
Married same-sex couples are treated the same as married heterosexual couples for federal tax return purposes. In states that do not recognize same-sex marriage, same-sex couples in a registered domestic partnership or civil union, however, cannot choose to file as married couples, as state law doesn’t consider those types of unions the same as heterosexual marriages.
3. What Is My Married Filing Status?
If you weren’t married on Dec. 31 of the tax year, the IRS considers you to be single, the head of household or a qualified widow(er) for that year.
If you were married, you have three filing possibilities:
- Married filing jointly
- Married filing separately
- Head of household
If more than one category might apply to you, the IRS permits you to pick the one that lets you pay the least amount in taxes.
4. Should We File Jointly or Separately?
If you’re married and don’t qualify to file as head of household, you typically have two choices: filing jointly or separately. It’s best to choose the one that allows you to pay the least amount in taxes, which all comes down to your particular circumstances.
Sometimes it makes sense to file separately, said Josh Zimmelman, owner of Westwood Tax & Consulting, a New York-based accounting firm. “A joint return means that your finances are linked, so you’re both liable for each other’s debts, penalties and liabilities.”
“So if either of you has some financial issues or baggage, then filing separately will better protect your spouse from your bad record, or vice versa,” he said.
If you file jointly, you can’t later un-couple yourselves to file as married filing separately for that year’s tax return. “On the other hand, if you file separate returns and then realize you should have filed jointly, you can amend your returns to file jointly within three years,” Zimmelman said.
5. Is ‘Married Filing Jointly’ the Best Option?
Even if married filing jointly has been your best choice in the past, don’t assume it will always be that way. Do the calculations each year to determine whether filing singly or jointly will give you the best tax result.
Changes in your personal circumstances or new tax laws might make a new filing status more desirable. What was once a marriage tax break might turn into a reason to file separately, or vice versa.
6. What Is the Healthcare Requirement for My Tax Filing Status?
The Patient Protection and Affordable Care Act — more commonly known as Obamacare — requires that you and your dependents have qualifying healthcare coverage throughout the year, unless you qualify for an exemption or make a shared responsibility payment. Even if you lose your health insurance coverage because of divorce, you still need continued coverage for you and your dependents during the entire tax year.
7. What Tax Filing Status Do I Use If My Spouse Died?
If your spouse passed away during the year, you’ll need to determine whether and how your filing status should change. If you didn’t marry someone else the same year, you may file with your deceased spouse as married filing jointly.
If you did remarry during the tax year, you and your new spouse can file jointly. In that case, you and your deceased spouse must file separately for the last tax year of the spouse’s life, however.
In addition, if you didn’t remarry during the tax year of your spouse’s death, you might be able to file as qualifying widow(er) with dependent child for the following two years if you meet certain conditions. This status entitles you to use joint return tax rates and the highest standard deduction amount.
8. Are We Both Liable If We File Jointly?
If you use the status married filing jointly, each spouse is jointly and severally liable for all the tax on your combined income, said Gail Rosen, a Martinsville, New Jersey-based certified public accountant. “This means that the IRS can come after either one of you to collect the full amount of the tax,” she said.
“If you are worried about your spouse and being responsible for their share of their taxes — including interest and penalties — then you might consider filing separately,’ she said.
9. Will One of Us Lose Marriage Tax Benefits If We File Separately?
Although filing separately might protect you from joint and several liabilities for your spouse’s mistakes, it does have some disadvantages. For example, people who choose the married filing separately status might lose their ability to deduct student loan interest entirely.
In addition, they’re not eligible to claim some tax credits, like the earned-income tax credit, and they might also lose the ability to claim the child and dependent care credit or adoption tax credit, said Eric Nisall, an accountant and founder of AccountLancer, which provides accounting services to freelancers.
10. How Can We Get a Marriage Tax Break Instead of a Marriage Tax Penalty?
Many people complain about the marriage tax penalty. “Married filing jointly may result in a higher tax bill for the couple versus when each spouse was filing single, especially if both spouses make roughly the same amount of income,” said Andrew Oswalt, a CPA and tax analyst for TaxAct, a tax-preparation software company.
You might have an opportunity to pay less total tax — getting a marriage tax break — if one spouse earns significantly less, however. “When couples file jointly with largely differing income levels, this may result in a ‘marriage tax benefit,’ potentially resulting in less tax owed than when the spouses filed with a single filing status,” Oswalt said.
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