What Tax Breaks Do Married Couples Get?

Tax breaks are provisions in tax law that reduce an individual’s or entity’s tax liability. These benefits can take various forms, such as tax credits, which directly reduce the amount of tax owed, or tax deductions, which lower the amount of income subject to taxation. Exemptions also function as tax breaks by excluding certain portions of income from being taxed. Marriage introduces specific considerations for tax filing, as a couple’s marital status at the end of the tax year determines the available filing options and can significantly influence their overall tax outcome.

Determining Your Filing Status

Married individuals generally have two primary tax filing statuses available to them: Married Filing Jointly (MFJ) and Married Filing Separately (MFS). To be considered married for tax purposes for a given year, individuals must be married as of December 31st of that tax year. This means if a couple marries on the last day of the year, they are considered married for the entire tax year.

The Married Filing Jointly status allows a married couple to combine their incomes, deductions, and credits on a single tax return. This is often the most common and advantageous filing status for married couples, as it can result in a lower overall tax liability. Both spouses are jointly and individually responsible for the accuracy of the return and any tax owed, even if only one spouse earned all the income.

Alternatively, married individuals can choose the Married Filing Separately status, where each spouse files their own tax return, reporting only their individual income, deductions, and credits. If one spouse itemizes deductions when filing separately, the other spouse must also itemize and cannot claim the standard deduction. This status might be chosen in specific situations, such as when one spouse wants to avoid joint liability for the other’s tax errors or if it leads to a lower tax bill due to significant individual deductions like high medical expenses.

While not a common choice for couples actively seeking tax benefits as a married unit, an individual who is legally married might qualify for the “Head of Household” filing status under specific circumstances. This applies if they lived apart from their spouse for the last six months of the tax year, paid more than half the cost of keeping up their home, and had a qualifying child or dependent living with them for more than half the year. This status is generally for individuals who are considered “unmarried” for tax purposes due to specific living arrangements, even if legally married.

How Filing Status Affects Income Tax Calculation

The choice of filing status directly impacts the calculation of federal income tax, influencing standard deductions, tax brackets, and eligibility for various tax credits. For the 2024 tax year, the standard deduction for married couples filing jointly is $29,200. This amount is double the standard deduction available to single filers, which is $14,600. When married individuals file separately, each spouse receives a standard deduction of $14,600, which is half of the joint amount.

Federal income tax rates are applied across different income ranges, known as tax brackets, which vary based on filing status. For example, in 2024, the 10% tax bracket for married couples filing jointly applies to taxable income up to $23,200, whereas for single filers, it applies to income up to $11,600. Similarly, the income thresholds for higher tax brackets, such as the 22% bracket, are also generally double for married filing jointly ($94,301 to $201,050) compared to single filers ($47,151 to $100,525). This structure means that a married couple filing jointly can earn a combined income twice as large as a single individual before reaching higher tax rates.

Marriage can also affect eligibility and the amount of various tax credits, particularly when filing jointly. The Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC), for instance, have income limitations that apply to joint filers. For 2024, the full Child Tax Credit is worth up to $2,000 per qualifying child, and it begins to phase out if the Modified Adjusted Gross Income (MAGI) is more than $400,000 for married couples filing jointly. The refundable Additional Child Tax Credit is worth up to $1,700 per qualifying child for 2024.

The Earned Income Tax Credit (EITC) also considers household income and family size, with different income thresholds for married couples filing jointly. For the 2024 tax year, the maximum earned income for eligibility for married couples filing jointly with three or more children is $66,819. The maximum credit amount for married joint filers with three or more children is $7,830. Investment income limits also apply, with a cap of $11,600 for 2024 to qualify for the EITC.

Education credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), also have income limitations that are adjusted for married filing jointly status. For both the AOTC and LLC in 2024, the credit begins to phase out for married couples filing jointly with a MAGI between $160,000 and $180,000, and is fully phased out at $180,000. The AOTC can provide up to $2,500 per eligible student for the first four years of post-secondary education, while the LLC offers up to $2,000 per tax return for qualified education expenses.

Adjusted Gross Income (AGI) limitations for certain deductions are also applied differently for married couples. For example, the medical expense deduction allows taxpayers to deduct medical expenses exceeding 7.5% of their AGI. For married couples filing jointly, this threshold applies to their combined AGI, which can make it easier to meet the percentage floor if one spouse has substantial medical costs. Deductibility of Traditional IRA contributions can also be impacted by AGI, with phase-out ranges that are higher for married couples filing jointly, particularly if one spouse is covered by a workplace retirement plan. For 2024, if both spouses are covered by a workplace plan, the deduction is reduced if MAGI is between $123,000 and $143,000, and fully phased out at $143,000.

Other Tax-Related Implications of Marriage

Marriage extends beyond annual income tax calculations to impact other significant tax areas. One such area involves retirement savings, specifically through spousal IRA contributions. A non-working or low-earning spouse can contribute to an Individual Retirement Account (IRA) based on their spouse’s earned income, provided they file a joint tax return. For 2024 and 2025, the annual contribution limit for an IRA is $7,000, or $8,000 for those age 50 or older. The combined IRA contributions for both spouses cannot exceed their total taxable income.

Estate and gift tax implications are also significantly altered by marital status due to the unlimited marital deduction. This provision allows one spouse to transfer an unlimited amount of assets to their spouse, either during their lifetime or at death, without incurring federal gift or estate taxes. This deduction treats married spouses as a single economic unit for transfer tax purposes, effectively postponing estate taxes until the death of the surviving spouse. The unlimited marital deduction applies only if the surviving spouse is a U.S. citizen.

When it comes to investments, married couples filing jointly typically report their combined capital gains and losses. These are netted together, meaning capital losses can offset capital gains, and any remaining net capital loss can be used to offset a limited amount of ordinary income. This combined reporting simplifies the process and can be advantageous if one spouse has significant gains and the other has significant losses.

The Affordable Care Act’s Premium Tax Credit (PTC) also has implications for married couples. Eligibility for the PTC, which helps make health insurance more affordable, is based on household income and family size. For married couples, their combined income is considered when determining eligibility and the amount of the credit. Married taxpayers are generally required to file a joint tax return to qualify for the premium tax credit. There are exceptions, such as for victims of domestic abuse or spousal abandonment.