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 benefits by taking advantage of the common tax deductions for married couples.
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 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 9 tax filing 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 $24,000 in 2018, and the amount is $12,000 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 for married couples to joint filers that aren’t available to those who file individually. This results in a marriage tax break.
However, 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 separately 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.
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2. 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 $132,000 a year as of the 2017 tax year.
3. Use Tax Breaks for High Medical Expenses
You can also deduct qualifying medical expenses from your taxes. You might claim expenses that exceed 7.5 percent of your adjusted income. 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.
4. 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.
The Tax Cuts and Jobs Act eliminated the marriage penalty for households in most income brackets, but could still affect those in higher income brackets.
5. 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 2018 is $2,000 per qualifying child, and taxpayers with less tax liability might get the remainder refunded to them. The income threshold at which the child tax credit begins to phase out is $400,000 if married filing jointly, and $200,000 if married filing separately.
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.
Married tax filers might be eligible for the child and dependent care credit if they paid expenses for the care of a qualifying individual so that they could work or look for work. The rules for who can be a qualifying dependent and who can be a care provider are strict. This credit is not available if you file separately.
6. 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. This is one of the tax loopholes for married couples. The contribution limit through 2019 is $6,000, or $7,000 if you’re 50 or over. You can open either a traditional or Roth IRA, but only traditional IRA contributions are deductible.
7. 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.
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.
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.
8. 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 $20,950 — but this amount increases with each child you have — and it tops at $54,884 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.
9. 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.
“If your child lives with you more than half the year, and you’re paying at least 50 percent of their support, then you should claim them as your dependent,” said Zimmelman. In cases of shared custody and support, you have a few options. “You might consider alternating every other year who gets to claim them,” he said. Or if you have two children, each parent can decide to claim one child, he said.
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.
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, 2018, 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.
Even if you’re married for the full tax year, the IRS might consider separated couples “unmarried” for tax purposes if you are not divorced but have a legally binding separation agreement, or if you and your spouse have lived apart for the last six months or more of the tax year. 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.
Need to Know: Frequently Asked Tax Questions for Married Couples
You might still have questions about how to file taxes if you are married. These are some of the biggest tax questions for married couples.
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.
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.
For Tax Year 2018, the rules remain unchanged under the Tax Cuts and Jobs Act.
If I changed my name this year, which name should I use when I file my taxes?
If you want to change your last name after a marriage or divorce, you must officially inform the federal government. Your first stop is the Social Security Administration (SSA).
Your name on your tax return must match your name in the SSA records. Otherwise, your tax refund might be delayed due to the mismatched records. Also, don’t forget to update the changed names of any dependents.
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.
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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 a 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.
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.”
Who gets a tax benefit for saving money in a retirement account?
If you contribute to a 401k plan, you can save money for your golden years and lower your taxable income now. If your employer offers a 401k plan, you can contribute money on a pretax basis, subject to certain limits. Nonworking spouses, however, can’t contribute to a 401k because they don’t have wages from an employer. Both of you can explore other tax benefits for contributing to different types of individual retirement accounts.
What do I do if I missed making quarterly tax payments?
Single or married, you might have to pay quarterly tax payments to the IRS, especially if you are self-employed. Make sure you know how to calculate estimated taxes. If you are required to make such payments but do not do so, you might have to pay an underpayment penalty, Rosen said.
All taxpayers must pay taxes during the year equal to the lower of 90 percent of the tax owed for the current year, or 100 percent — 110 percent for higher-income taxpayers — of the tax shown on your tax return for the prior year, Rosen said. “The problem for married couples is that often they do not realize they owe more taxes due to the combining of the two incomes,” she said.
You should be proactive each year. “To avoid owing the underpayment penalty, make sure to do a projection of your potential tax for  when you finish preparing your  taxes,” she said, adding that you should make sure to comply with the payment rules outlined above.
Do we still qualify for passive losses with our joint income?
Crystal Stranger — an El Paso, Texas-based enrolled agent, president of 1st Tax and author of “The Small Business Tax Guide” — said she sees a lot of married couples who have issues with passive loss limitation rules.
“With these rules, if you have a passive loss from rental real estate or other investments, you are allowed to take up to $25,000 of passive losses against your other income,” she said. You can only make this claim if your modified adjusted gross income is less than $100,000, or $50,000 if married filing separately.
Can we get a tax break for selling our house this year?
The IRS provides a tax break when you sell your home, subject to certain conditions. Generally, you must meet a minimum residency period by owning and living in the house for two of the five years preceding the sale.
A single person who owns a home that has increased in value can qualify to exclude up to $250,000 in gains from income, said Andrew Oswalt, a CPA and tax analyst for TaxAct, a tax-preparation software company. Married people can exclude up to $500,000 in gains.
This rule can become tricky if one person in the couple purchased the house prior to the marriage: “If you are married when you sell the house, only one of you needs to meet the ownership test for the $250,000 exclusion,” said Oswalt. “You both must meet the residency period to exclude up to the full $500,000 of gain from your income, however.”
Can we deduct our student loan interest?
If you are paying back student loans, you might be looking forward to taking the student loan interest deduction. If you’re married, however, it might not be so easy to do that.
“For a single filer, the deduction begins to phase out when the taxpayer’s adjusted gross income is greater than $65,000,” said Oswalt. “This amount is [$135,000] when filing jointly. So if both spouses are making $65,000 or less, then their deduction will not be affected by the phaseout. However, if one is making $60,000 and the other $75,000, the deduction begins to phase out, which will ultimately result in a larger tax bill.”
How do we report gambling wins and losses on our taxes?
Imagine a married couple who both like to gamble. He’s not so lucky and has losses, and she has winnings. If they file a joint return, they might have to report the gambling winnings as taxable income. Meanwhile, the losses might be deductible if the couple itemizes their deductions instead of taking the standard deduction.
They can’t take the number of gambling winnings, subtract the losses and claim the net amount as winnings. Instead, they must report the entire amount of gambling winnings as income, whereas the losses are reported as an itemized deduction up to the amount of the winnings. The IRS requires you to keep accurate records of your winnings and losses.
What do we do if one of us is a victim of tax identity theft?
Identify theft can be a financial nightmare. Tax identity theft happens when someone files a tax return using one spouse’s or both spouses’ Social Security numbers in hopes of scooping up your legitimate refund. If this happens to you, “contact the IRS immediately and fill out an identity theft affidavit,” said Zimmelman. “You should also file a complaint with the Federal Trade Commission, contact your banks and credit card companies, and put a fraud alert on your and your spouse’s credit reports.”
Where can I get a copy of my tax return?
The IRS and state tax agencies work to develop safeguards to avoid identity theft related to tax returns. Getting your adjusted gross income for previous years might be difficult if you are divorced and not on good terms with your ex or if you can’t find all of your documents for totaling your income for that year; however, you still have options. You might be able to get the information if you go to the IRS website and use the Get Transcript service.
Marriage affects all your finances, including — and perhaps especially — your taxes. Learn how to navigate IRS rules and keep more money in your pocket.
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