Getting married can mean big changes to your tax returns and tax filing. We asked three of our Motley Fool contributors to weigh in on the biggest ways your taxes can be affected.
Selena Maranjian: One way that getting married can affect your taxes is via the "marriage penalty" -- or, sometimes, the marriage bonus. As you know from your life as a single taxpayer, when it comes to deductions, you can itemize your deductions or you can take a standard deduction. You might think that whatever the standard deduction is for single folks, it would be twice that for married people. Not so -- at least not for the tax brackets above the 10% and 15% ones. Check out the table below, featuring the tax brackets for 2014:
Now imagine a couple where both partners collect equal incomes of $85,000, for a total household income of $170,000. Note that when each partner was single, each would remain well within the 25% tax bracket. But once they have a joint income, more than $20,000 of it ends up in the 28% bracket, costing them more money. That's the marriage penalty. It affects many couples, since so many households are two-earner ones these days.
A marriage "bonus" also exists. For an example of it, imagine a couple where one spouse doesn't earn an income and the other earns $100,000. Before marrying, the earner would have been well into the 28% tax bracket. But once they file jointly, they can have a household income of almost $150,000 while remaining in the 25% bracket.
In a marriage, the more similar the two partners' incomes, the more likely it is that they'll suffer the marriage penalty, while very different incomes can result in a marriage bonus. You may be able to avoid the penalty and save money overall by filing separately, but crunch all the numbers first to be sure, perhaps with some tax-prep software.
Dan Caplinger: As Selena points out, the tax brackets contain a marriage penalty for many people who choose to file jointly. Many taxpayers therefore think that filing separately is a smarter move, but that can have even bigger tax traps.
Most importantly, married taxpayers who file separately lose eligibility for some of the most valuable tax breaks. The Earned Income Tax Credit, the Child Tax Credit, and the Child and Dependent Care Tax Credit are all unavailable to those with married filing separately status, and they can't take the Elderly and Disabled Credit. Most of the tax breaks related to education are also not allowed for married taxpayers filing separately, such as the American Opportunity Tax Credit, the student loan interest deduction, the tuition deduction, and the Lifetime Learning Credit.
In addition, married taxpayers who file separately have to agree on how they'll take their deductions. If one spouse itemizes deductions, then the other has to itemize as well -- even if the standard deduction would result in a larger reduction in taxable income.
There are a few instances in which filing separately is better, such as when one spouse has large deductible expenses that are based on income levels. If you're concerned about your spouse's tax positions or suspects tax fraud, filing separately can shield you from potential liability. For the most part, though, filing separately is a poor move and doesn't save you from a marriage penalty.
Dan Dzombak: When you get married, your filing status changes, you can change your W-4 to take another personal allowance, and, if you changed your name, you must let the Social Security Administration know before you file your return.
When you go from being single to being married your filing status changes from single to either married filing jointly or married filing separately. Note that your filing status is based on the tax year. So, for 2014's taxes, if you got married on Jan. 1, 2015, then you do not have the option to file as married.
Second, once you get married you can claim an additional personal allowance on your form W-4. To do this, you will have to go to your employer and ask to fill out a new form W-4. By taking an additional allowance, less money is withheld from your paycheck for taxes. The advantage of this is that you have more money per paycheck, however it does not change the amount of taxes you owe the government.
Finally, if you legally changed your name once you got married you need to tell the Social Security administration so you can get a corrected card. Once they have processed the information they will tell the IRS of your new name associated with your Social Security number.
