How Does Getting Married Affect Taxes?

Marriage can significantly impact finances, especially when it comes to taxes. Understanding these changes is crucial for newlyweds as they navigate their new financial realities. Tax implications of marriage affect filing status, income brackets, deductions, and credits, all of which influence financial planning.

Filing Status Options

One of the first tax decisions married couples face is selecting a filing status. The IRS offers two primary options: “Married Filing Jointly” and “Married Filing Separately,” each with distinct tax implications. Evaluating your financial situation is essential to determine which status is more beneficial.

“Married Filing Jointly” often provides a higher standard deduction, set at $27,700 for the tax year 2024, and can lead to lower tax rates by combining both spouses’ incomes. This status also opens eligibility for valuable credits like the Earned Income Tax Credit and the Child Tax Credit, which can reduce overall tax liability.

In contrast, “Married Filing Separately” might be advantageous in specific cases, such as when one spouse has significant medical expenses or other deductions tied to adjusted gross income thresholds. It also limits liability to individual tax returns, which can be helpful if one spouse has tax compliance concerns. However, this status typically results in higher tax rates and reduced eligibility for certain credits, making it less appealing to most couples.

Combined Income Changes

Combining incomes after marriage can change a couple’s tax liability, sometimes pushing them into a higher tax bracket, known as the “marriage penalty.” For example, in 2024, the 22% tax bracket for single filers applies to incomes between $44,726 and $95,375, while for joint filers, it applies to incomes between $89,451 and $190,750. The brackets are not simply doubled, which may increase taxes for some couples.

Combined income can also affect eligibility for deductions and credits. For instance, the Child Tax Credit phases out at $200,000 for single filers and $400,000 for joint filers. Similarly, the student loan interest deduction, capped at $2,500, begins to phase out for joint filers with a modified adjusted gross income (MAGI) over $145,000, compared to $70,000 for single filers.

Credits and Deductions

Tax credits and deductions become more complex for married couples. The American Opportunity Tax Credit (AOTC) provides up to $2,500 per eligible student for qualified education expenses, but it phases out for joint filers with a MAGI above $180,000. The Lifetime Learning Credit (LLC), worth up to $2,000, also has a MAGI limit of $160,000 for joint filers. Careful income management is key to retaining eligibility for these credits.

The Adoption Tax Credit allows couples to claim up to $15,950 in qualified adoption expenses in 2024, with phase-outs beginning at a MAGI of $239,230. Beyond credits, deductions like the mortgage interest deduction remain available for interest paid on mortgages up to $750,000. Joint filers can also maximize charitable contribution deductions by itemizing when these exceed the standard deduction. Strategic planning, such as timing donations or using donor-advised funds, can enhance tax savings.

Withholding Adjustments

Adjusting tax withholding is essential for newlyweds to align with their updated tax liability. The IRS Form W-4 helps determine the appropriate amount of federal income tax to withhold from paychecks. Revisiting this form after marriage can prevent underpayment or overpayment of taxes.

Using the IRS Tax Withholding Estimator, an online tool, couples can calculate the correct withholding based on combined income, deductions, and credits. Proper adjustments can avoid a large tax bill or over-withholding, ensuring better cash flow throughout the year.

Retirement Accounts

Marriage often changes retirement planning, allowing couples to coordinate strategies for maximizing tax advantages and long-term savings. Retirement accounts like 401(k)s and IRAs offer tax-deferred or tax-free growth, and married couples can enhance their benefits by planning together. For instance, a working spouse can contribute up to $6,500 annually (or $7,500 if age 50 or older) to a spousal IRA for a non-working spouse, provided they file jointly and meet income limits.

The Saver’s Credit also incentivizes retirement contributions for lower- and middle-income households. In 2024, this credit is worth up to 50% of contributions, with a maximum of $2,000 per individual. It begins to phase out at an adjusted gross income of $43,500 for joint filers and disappears above $73,000. Coordinating 401(k) contributions to maximize employer matches further boosts savings and tax benefits.

State-Level Factors

State tax laws can significantly influence how marriage affects a couple’s finances, as states vary in their treatment of income, deductions, and credits. In community property states like California, Texas, and Arizona, income is split equally between spouses for tax purposes, which can sometimes lower the effective tax rate if one spouse earns significantly more. Non-community property states generally tax income based on individual earnings, more closely mirroring federal rules.

Some states also offer marriage-specific benefits, such as increased homestead exemptions that reduce property tax burdens or credits for expenses like childcare or education. However, combined income can sometimes lead to state-level marriage penalties, pushing couples into higher tax brackets or reducing eligibility for credits. Understanding state-specific tax laws is crucial for effective planning, particularly in states with complex tax codes.