Single Vs. Married When Filing for Taxes

Being married has lots of advantages. Studies have shown married people are happier and have better health habits. But does the happily ever after carry over into tax advantages? There are several things to consider when you marry that will change the way you do your taxes.

When you do your taxes, you need to decide your status. And if you are legally married, you must file as married. This goes for same-sex as well as heterosexual couples. If you are single, even if you have a domestic partner, you are considered single by the Internal Revenue Service. If you are married on Dec. 31, the IRS considers you married when you file taxes for the year. If you are legally separated or divorced on that day, you can file as single. There is a difference in taxes between married and single.

Married people can choose whether to file as married filing jointly or married filing separately. If you choose to file separately, you’ll each fill out a tax return. If you choose to file jointly, you’ll probably save time and money, and you fill out only one tax return. So you’ll need to decide which way to file, whether you should put on your W-2 married vs single, and both spouses must agree.

There is such a thing as the marriage penalty, and conversely, the marriage bonus. Marriage penalties usually affect those with very high and low incomes, while the marriage bonus affects many middle-income couples with disparate incomes. For middle-income couples whose incomes are somewhat different, the combined incomes often keep them in a similar tax bracket, because of the wider income tax brackets for married people. So when you combine your two incomes, you will pay fewer dollars in taxes.

There are tax breaks for filing jointly. Couples who file jointly qualify for tax credits, including the Earned Income Tax Credit, American Opportunity and Lifetime Learning Education Tax Credits, credit for adoption expenses and Child and Dependent Care Tax Credit. Those who file jointly usually receive higher income thresholds for some taxes and deductions, allowing them to earn more money while paying fewer tax dollars. Those who choose to file separately are disqualified from filing for the tax credits mentioned above. They are limited to a smaller deduction for the contribution to an IRA. They cannot deduct for student loan interest or tuition and fees deduction. If you’re in the highest tax bracket, which for 2018 is 37 percent, and you marry someone who earns a similar income to yours, that may be enough to push you into a still higher tax bracket than the two of you would pay if you remained single. For low-income couples, the Earned Income Tax Credit may result in reduced after-tax income.

With no children, marriage bonuses can be up to 8 percent of a couple’s income, and penalties can be as large as 4 percent. With one child, marriage bonuses can be up to 21 percent of a couple’s income, and penalties can be up to 8 percent. With two children, bonuses can be up to 13 percent of a couple’s income and penalties up to 12 percent.

One advantage to filing as a single person or a married person filing separately is deducting capital gains losses from income. Singles and those who are married filing separately can deduct $3,000, but a married couple filing jointly can deduct $3,000 total. Another advantage is in medical costs. For 2017 and 2018, the IRS will allow you to deduct out-of-pocket medical costs over 7.5 percent of your adjusted gross income. If one of you has high medical costs, you may be better able to take advantage of this deduction filing separately. In 2019, that 7.5 percent ceiling rises to 10 percent.

If you’re single, the standard deduction for 2018 nearly doubled to $12,000. For married couples, it will be $24,000 in 2018. Increases in the standard deduction will mean fewer of us, married or single, will itemize for 2018 returns. When you marry, you will want to check your withholding status. You will need to decide how to distribute your exemptions. If you each claim two before marrying, you can’t claim four. You may decide it’s more advantageous for one spouse to claim all four and the other to claim zero. Just make sure you’re withholding enough to cover your taxes.

For singles, the standard deduction is $6,350 for the 2017 tax return. For couples, it’s $12,700. Pay attention to those, because they are considerably different from 2018, and it’s important to keep that in mind, so you don’t become confused as you switch from your 2017 taxes to your 2018 taxes.