Of course we don't make marriage decisions based on whether we will benefit from it from a tax standpoint. However, if you're sure about the person but not about the timing, here are some guidelines that might push the decision one way or the other on whether to head to City Hall or elope before the year ends.
Tax Advantages of Being Married
Lower Tax Bracket: The "marriage penalty" is not always the case for couples. In fact, if one spouse makes significantly less than the other or doesn't work at all, that person can actually pull the spouse with a higher income into a lower tax bracket. If one is an entrepreneur and is not having a good year, the business loss can be used to offset some of the income of the other spouse, according to accountant Cris Espinosa.
IRA Deductions: A spouse can also contribute to an IRA without being employed. You are also limited to putting $5,000 a year before taxes into your IRA, but you can put money into your spouse's and deduct up to $10,000 on a joint tax return.
Benefit Choices: If both receive work benefits, they can pick and choose the best, and share in benefits that the other may receive when they don't, such as childcare.
More Charitable Write-Offs: While there is a cap on write-offs for charitable donations, it's higher for married couples.
No Estate Tax: There is no estate-tax for any amount of money left to a spouse.
Time + Cost Efficient: Less time and cost to file together than individually
Double the Deductions: The Largest Standard Deduction is doubles for couples.
Buying and Selling Perks: If you pass the time and residency test for a long-term investment, such as a house, then you can earn up to $500,000 of the sale tax-free, which is double of the amount allowed by an individual. Plus, the qualifying tests are more lenient for couples.
Tax Disadvantages of Being Married
Equal Liability: If your spouse "fudges the numbers," you are also liable, unless it happened before you got married or you can prove you didn't know about it.
Equal Penalty: A refund could be delayed or blocked if one spouse has a garnishment for an unpaid loan or child support
Marriage Penalty: Of course, if you both make higher incomes, then you could run into the marriage penalty by being pushed into a higher tax bracket together.
Lower Deductions: Your medical expense deduction could drop if your joint income is too high. A higher income from one of the spouses could also mean few miscellaneous deductions.
More Social Security Taxes: As your income increases, more of your Social Security payments are subject to taxes
Personal Exemptions Gone: If you marry a person with substantial income, potentially all your personal exemptions could disappear
Less Social Security: Also, two unmarried individuals receive more than a married couple does from social security
We're certainly not implying to skip your big day if the numbers don't add up, but there are many variables to weigh while filing your first joint tax return. Evidence does point to more benefits for couples who have one spouse earning significantly more than for couples where both make a substantial income, though we don't predict these tax barriers are enough to block true love.
If you're still curious about the benefits for you and your significant other, use this Marriage Bonus and Penalty Tax Calculator to determine if a Christmas wedding is right for you! Feel free to weigh in on the comments below. For more wedding questions, feel free to post similar questions as "Wedding or Marriage Tax Advantages" on askweddingplanning.com.
Lastly, we do recommend you use an accountant when filing your income tax returns whether you do get married or not.