Is Getting Married Better for Taxes?

Marriage introduces a significant shift in an individual’s financial landscape, particularly concerning their tax obligations. The impact on a couple’s tax situation varies considerably based on income disparities, combined earnings, and eligible deductions and credits. Understanding these changes is important for effective financial management.

Understanding Tax Filing Status

When individuals marry, their tax filing options expand. Marital status on December 31st of a tax year determines the filing options for that year. Married couples generally have two primary choices for federal income tax returns: Married Filing Jointly (MFJ) or Married Filing Separately (MFS).

Married Filing Jointly (MFJ) is the most common and often most advantageous option for married couples. Both spouses combine their incomes, deductions, and credits on a single tax return. A key implication is that both spouses are jointly and severally liable for the tax liability, meaning the IRS can pursue either spouse for the entire amount owed. This status offers access to more favorable tax brackets and a higher standard deduction, potentially leading to a lower overall tax bill.

Conversely, Married Filing Separately (MFS) involves each spouse filing their own tax return, reporting only their own income, deductions, and credits. While less common, this status can be chosen under specific circumstances. For example, it may be considered if one spouse has significant medical expenses, or if one spouse is concerned about the other’s past tax compliance or substantial individual debts.

Choosing MFS often comes with limitations. Couples filing separately are ineligible for certain tax credits, such as the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit, and education credits. If one spouse itemizes deductions, the other must also itemize, even if their individual deductions are less than the standard deduction. The standard deduction for MFS is lower than for MFJ, and tax brackets for MFS can be less favorable, potentially resulting in a higher combined tax liability.

How Marriage Affects Your Tax Liability

Marriage can significantly alter a couple’s tax liability, potentially resulting in a “marriage bonus” or a “marriage penalty.” The impact depends on combined income levels and how they align with federal tax brackets.

A marriage bonus occurs when one spouse earns significantly more than the other, or if only one spouse has income. Combining incomes on a joint return can pull some of the higher earner’s income into lower tax brackets, reducing the overall tax bill.

Conversely, a marriage penalty can arise when two spouses earn similar, high incomes. While tax brackets for married couples filing jointly are generally double those for single filers in lower income ranges, this is not always true for higher income brackets. For example, the top marginal income tax rate of 37% applies to single filers with taxable income over $518,900 for 2024, but for married couples filing jointly, this rate applies to combined taxable income over $647,851. Since the joint threshold is not exactly double the single threshold at the highest income levels, couples with two high, relatively equal incomes may pay more tax than if they had remained single.

The standard deduction also affects tax liability. For 2024, the standard deduction for married couples filing jointly is $29,200, double the $14,600 for single filers. This structure ensures married couples do not lose this deduction benefit by combining incomes. If a couple itemizes deductions, their combined eligible expenses, such as mortgage interest up to $750,000 or state and local taxes (SALT) up to a $10,000 limit, are aggregated on their joint return.

Marriage affects eligibility for various tax credits, which can significantly reduce a couple’s tax liability. The Child Tax Credit, for instance, has higher income phase-out thresholds for married couples filing jointly than for single filers. However, combining incomes can cause some couples to exceed these thresholds, leading to a reduced or eliminated credit. The Earned Income Tax Credit (EITC) also has different income limits and maximum credit amounts for married couples, and high combined incomes can phase out eligibility. Education credits, such as the American Opportunity Tax Credit and the Lifetime Learning Credit, also have income limitations that can be impacted by a couple’s combined income. The Premium Tax Credit, which helps eligible individuals and families afford health insurance purchased through the Health Insurance Marketplace, is another credit with income-based eligibility that can be affected by the combined income of married filers. For many credits, filing separately can lead to complete ineligibility, making joint filing generally more beneficial.

Beyond deductions and credits, marriage can influence other tax considerations. For example, the exclusion for capital gains on the sale of a primary residence doubles from $250,000 for a single individual to $500,000 for married couples filing jointly, provided certain ownership and use tests are met. The taxation of Social Security benefits also involves income thresholds, and a combined higher income can result in a larger portion of benefits becoming taxable. Certain income exclusions or deductions, such as for student loan interest, may have income limitations applied to combined income, potentially limiting or disallowing the deduction if joint income is too high.

Financial Planning for Married Couples

Effective financial planning for married couples involves proactively managing their tax situation to optimize outcomes. A primary step for two-income households is adjusting their W-4 forms with their employers. This ensures the correct amount of federal income tax is withheld from their paychecks throughout the year. Failure to properly coordinate W-4s can lead to under-withholding, resulting in an unexpected tax bill or penalties, or over-withholding. The IRS Tax Withholding Estimator tool can assist couples in determining the appropriate adjustments.

For couples with income sources not subject to regular payroll withholding, such as self-employment income or significant investment gains, paying estimated taxes is necessary. These payments are made in four quarterly installments to the IRS using Form 1040-ES. Accurately estimating income and deductions throughout the year allows couples to meet tax obligations and avoid underpayment penalties.

Maintaining organized financial records is paramount for married couples, especially for tax purposes. This includes keeping diligent records of all income statements, such as W-2s and 1099s, as well as documentation for all potential deductions and credits. Comprehensive record-keeping simplifies the tax preparation process and provides necessary support in case of an IRS inquiry. Digital record-keeping solutions can be particularly helpful for managing joint financial documents.

Asset ownership, whether jointly or individually, can have tax implications, particularly concerning capital gains and estate planning. When assets are jointly owned with rights of survivorship, the surviving spouse receives a “step-up in basis” to the fair market value at the deceased spouse’s death, which can reduce capital gains tax if the asset is later sold. Understanding these structures is important when planning for wealth transfer and minimizing tax liabilities for heirs.

Marriage influences eligibility and contribution limits for various retirement accounts. A spouse with little or no earned income may contribute to a Spousal IRA based on their working spouse’s income, allowing both individuals to save for retirement. Combined income can affect eligibility for certain retirement account types, such as Roth IRAs, which have income phase-out limits applied to the couple’s combined adjusted gross income. Exceeding these limits can restrict or eliminate direct Roth IRA contributions.

Marriage introduces important considerations for estate planning, particularly regarding estate and gift taxes. The unlimited marital deduction allows for the tax-free transfer of assets between spouses, either during their lifetime or at death. This means a surviving spouse does not incur federal estate tax on inherited assets. This feature provides flexibility in estate planning, allowing couples to defer estate taxes until the death of the second spouse.