Big Savings on Tax for Newly Married Couples
Of the several advantages of being married to someone, the least expected one comes in the form of tax deductions. Post marriage, if you file your taxes jointly, you can cut down on tax liability by a decent enough margins. You can avoid certain types of penalties, largely dependent on your source of income. If you and your spouse are in different tax brackets, the one earning lower can help in bringing down the overall income and thus reduce the tax liability.
Tax Bracket Changes
A tax bracket essentially provides the highest amount of taxes that you would be liable to pay. As the tax bracket changes with different filing status, the tax rates applicable to you before marriage might change. Post marriage the source of income of both partners is taken into consideration. While it might bump up the bracket for one, it might bring down the tax bracket for the other one.
Enhanced deductions and exemptions
As your status for filing taxes changes from single to married filing jointly, there are several other advantages in the form of deductions and exemptions. Post marriage you and your spouse are eligible for two personal deductions, one each.
Married couples also enjoy the highest standard deductions in the entire tax regime. For an instance, in the year 2017 someone filing as a single taxpayer would have walked away with a $6,350 deduction. For the status married filing jointly the same deductions stood at $12,700.
Each child that you declare as dependent, provisions you for tax deductions and the amount stands at $4,050 per child.
Gifts and Real Estate
If you are not already aware of it, spouses can gift each other any number of gifts either in cash or even property. You can work this in your favor when it comes to property planning. So, the next time you are planning for something in the real estate, do not forget about this clause.
To itemize or to claim standard deduction
Every year one of the toughest decisions that one has to make during the tax season is whether to itemize or opt for standard deductions. But if you own a home and are married, it would add more value if you opted to itemize your deductions. Simply because the interest rate on your mortgage would result in higher deductible amount than what standard deduction would provide you.
When you file taxes as married filing jointly, you have access to higher exemptions and deductions, than what you would have paid if done separately. Thus, updating your W-4 Form with your employer to reflect these changes is advisable.
We are all aware that there is an upper cap on charitable deductions on a yearly basis. However, married couples enjoy a higher limit when it comes to charitable deductions. This allows for higher deductions under charity which makes way for better tax saving.
Additions to IRA
According to the IRS, you or your spouse may contribute to your IRA funds even if one of you does not work. The benefits that married couples get due to filing jointly are dramatically different from the ones single taxpayers receive. This allows you to save a substantial amount of money as tax and put in money for your retirement at the same time.
If all of the above points were not good enough, you also get to save time while doing your taxes. As both of you must fill one tax return instead of two, you will end up saving time as well.