What Does Married One Income Mean for Your Tax Filing Status?

Managing taxes as a married couple with one income can be confusing, especially when determining the best filing status. How you file impacts tax rates, deductions, and credits, making it an important financial decision. Understanding tax laws for single-income households helps ensure you’re not overpaying or missing out on benefits.

Eligibility Requirements

The IRS determines tax benefits based on marital status as of December 31 of the tax year. If a couple is legally married on that date, they are considered married for the entire year.

For a single-income household, the working spouse must have earned income to claim certain benefits, such as the Earned Income Tax Credit (EITC) or retirement account contributions. The non-working spouse may still qualify for tax advantages, such as contributing to a spousal IRA, which allows tax-deferred retirement savings. In 2024, the contribution limit for a spousal IRA is $7,000, or $8,000 for those aged 50 and older.

Dependents also impact tax eligibility. Couples with children or other qualifying dependents may qualify for the Child Tax Credit, which provides up to $2,000 per child under 17, with $1,600 refundable. The Child and Dependent Care Credit can also offset childcare expenses if the working spouse incurs daycare or similar costs.

Filing Status Choices

Married couples with one income must decide whether to file jointly or separately, as this choice affects tax rates, deductions, and available credits. The IRS provides two primary options: Married Filing Jointly (MFJ) and Married Filing Separately (MFS).

Filing jointly is generally more beneficial because it grants access to a lower tax rate structure and a higher standard deduction. In 2024, the standard deduction for MFJ is $29,200, compared to $14,600 per spouse if filing separately. A joint return also allows eligibility for credits such as the Saver’s Credit, which incentivizes retirement savings, and education-related benefits like the Lifetime Learning Credit.

Filing separately may be useful when one spouse has significant medical expenses. The IRS allows deductions for medical costs exceeding 7.5% of adjusted gross income (AGI), so separate returns can sometimes help meet this threshold. However, this status comes with trade-offs, including the loss of certain credits like the Earned Income Tax Credit and restrictions on deductions for student loan interest.

Combining Income on a Joint Return

When filing a joint return, all income from the working spouse is combined into a single taxable amount. This includes wages, self-employment earnings, rental income, dividends, and other reportable earnings. If the household has investment accounts, capital gains and interest must also be included. The total taxable income determines which federal tax bracket applies, with rates ranging from 10% to 37% in 2024. The progressive tax system means portions of income are taxed at different rates rather than the entire amount falling under one bracket.

Deductions can significantly reduce taxable income. Contributions to tax-advantaged retirement accounts, such as 401(k) plans and traditional IRAs, lower taxable income while building long-term savings. If the working spouse is self-employed, deducting business expenses, health insurance premiums, and contributions to a SEP IRA or Solo 401(k) can further reduce tax liability. Charitable donations, mortgage interest, and state and local taxes (capped at $10,000 under the SALT deduction limit) also impact the final taxable amount.

Withholding Adjustments

Ensuring the correct amount of tax is withheld from each paycheck is especially important in a single-income household. The IRS Form W-4 determines how much federal income tax is deducted from wages, and adjusting it properly helps prevent large tax bills or excessive refunds. Since tax brackets are based on total household income, incorrect withholding can lead to underpayment penalties.

One way to fine-tune withholding is by using the IRS Tax Withholding Estimator, which factors in income, deductions, and credits to provide a more precise recommendation. If too little tax is being withheld, increasing the amount per paycheck can prevent a surprise bill during tax season. Conversely, reducing withholding allows more take-home pay throughout the year, which can be allocated toward savings or investments. This is particularly relevant for households that expect to claim significant deductions, such as mortgage interest or medical expenses.

Common Misconceptions

Many taxpayers assume that having only one income in a marriage automatically results in higher taxes, but this is not always the case. The tax code provides benefits to married couples, particularly those filing jointly, through lower tax brackets and expanded deductions. Filing separately is sometimes thought to reduce tax liability, but it often leads to losing valuable credits and deductions available only to joint filers. In most cases, the total tax burden is lower when income is combined on a single return.

Another common misunderstanding is that the non-working spouse has no tax-related opportunities. While they may not have earned income, they can still contribute to a spousal IRA, benefit from tax-free gifts from their spouse under the unlimited marital deduction, and play a role in tax planning strategies such as shifting investments to accounts with lower tax implications. Proper planning ensures that a single-income household maximizes available tax advantages.