30 Oct Tax changes after marriage
Q: I’m getting married in a few months. We both work, but I earn almost double the income that he does, plus I also get Required Minimum Distributions from an inherited IRA. How can we tell if it makes more sense for us to file taxes separately after the wedding?
A: Congratulations on getting married!
It’s a wonderful life event, but it’s not necessarily as advantageous as you might like it to be from a tax perspective.
For the vast majority of couples, married filing jointly results in a lower tax bill than married filing separately, said Brian Kazanchy, a certified financial planner with RegentAtlantic Capital in Morristown.
“This is due to the fact that the income tax thresholds moving from one tax rate to the next for married filing separately are exactly half of the thresholds for married filing jointly,” Kazanchy said. “This eliminates any benefit the higher income earner might otherwise gain from combining their income with the lower wage earner.”
According to one Turbo Tax study, Kazanchy said, less than 5 percent of married couples file separately.
The most common situations where Married Filing Separately results in a lower tax bill is when incomes for both partners are similar, and one or both individuals gain advantages from miscellaneous itemized deductions or medical expenses, Kazanchy said.
Gail Rosen, a Martinsville-based certified public accountant, said the “averaging” effect of combining the two incomes can bring some of your income out of the higher tax bracket.
There are a few cases married filing separately will benefit you, she said.
“One major reason is that you are each jointly and severally liable for the tax on your combined income, including any additional tax that the IRS can assess,” Rosen said. “Some spouses decide to pay a higher tax since they do not feel comfortable being responsible for their spouses tax.”
Rosen recommends you run the numbers both ways to see which is the most advantageous to you and your soon-to-be spouse.
Email your questions to .This story was first posted in November 2014. NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.