What Are the Tax Benefits of Marriage?
Litchfield, NH Newlyweds Wonder About Their Taxes
Once married, you and your spouse can file taxes jointly, which has a number of tax benefits. If either one of you makes significantly less income, this can lower your tax bracket and reduce your tax rate. Combining incomes will bring the partner in the higher tax bracket to a lower level, reducing the couple’s overall tax bill. There are also more deductions available to married couples filing jointly, including a higher threshold for charitable contributions and residency gain.
Newlyweds in Litchfield were considering filing jointly versus separately on their tax return. Wondering about the difference, they contacted Merrimack Tax Associates for advice.
Lower Tax Bracket May Reduce the Couple’s Tax Bill
In many cases one person in the marriage will make more money than the other. By filing jointly your total income as a married couple will reduce the tax bracket that you are both falling into. The couple’s entire income will thus be taxed at this lower rate, saving money in taxes.
More Deductions Available for Joint Filers
The lowered average income when considering both individuals can also ensure that you are eligible for additional deductions. This includes a total deductible for charitable contributions and the American Opportunity Credit for education expenses. Many of these deductions begin to phase out at $80,000 for individuals, but that number is $160,000 for couples.
Home ownership is another area where filing jointly can be advantageous. Single filers can exclude up to $250,000 in income gain from the sale of a home. When filing jointly, this number increases to $500,000 providing a significant financial benefit for both individuals.
Additionally, if you are hiring a professional to do your tax return there is only one return when filing jointly. This will save money on your tax preparation.
With a better understanding of single versus joint tax filings, the couple in Litchfield found that filing jointly would save them plenty of money on their taxes now and in the future.