Marriage brings a lot of changes, and one of the most notable is your tax status. Once you’ve said, “I do,” you can no longer file as a single person. Once married, you may either file taxes as married filing jointly or married filing separately. Your financial situation will help you make the decision as to filing status, but filing jointly allows you to take advantage of certain other marital tax benefits.
As a married couple, you have the option to file taxes either jointly or as individuals. Specific financial circumstances may warrant one filing choice over another.
Defining the Standard Deduction
As of 2019, the standard federal income tax deduction for married couples is $24,400. Before this year, a married couple could claim two instead of one personal exemption, but the Tax Cuts and Jobs Acts, passed in late 2017, eliminates personal exemptions.
Identifying Tax Brackets
Along with your filing status, your tax bracket may likely change. For 2019, the following tax brackets apply for married couples filing jointly:
- 10 percent on taxable income up to $19,400
- 12 percent on taxable income from $19,401 to $78,950
- 22 percent on taxable income from $78,951 to $168,400
- 24 percent on taxable income from $168,401 to $321,450
- 32 percent on taxable income from $321,451 to $408,200
- 35 percent on taxable income from $408,201 to $612,350
- 37 percent on taxable income exceeding $612,351
Exploring Spousal IRAs
If you do not work, but your spouse does, and you file jointly, you can fund a spousal IRA as long as your spouse’s earnings are sufficient to qualify. For 2019, those under age 50 may contribute up to $6,000 to a spousal IRA, and those over 50 may contribute up to $7,000. Depending on your income and whether your spouse participates in an employer-sponsored retirement plan, you may be able to deduct some or all of your contributions to a traditional IRA on your tax returns.
Evaluating Inheritance Taxes
If you aren’t married to your partner, he or she can still name you as the beneficiary in their will, but if you live in a state imposing inheritance tax you might have to pay a significant amount to the state’s coffers. If you are married, you do not pay inheritance tax on property left to you by your spouse.
Inherited Retirement Plans
A spouse is the only beneficiary who may elect to treat an inherited IRA, 401(k) plan or similar qualified retirement plan as their own. They also have the option of transferring the assets to an inherited IRA, which allows a spouse under age 59-½ to avoid the IRS’ 10-percent penalty for asset withdrawal before that age when held in their own IRA account.
Understanding Estate Taxes
It was the lack of a spousal exemption for same-sex couples and estate taxes that led to the Supreme Court’s 2013 decision finding the Defense of Marriage Act prohibiting same-sex marriage as unconstitutional, in the United States versus Windsor.
Married couples may shield up to $22.4 million from estate taxes under the current tax plan. Single people may exempt $11.2 million. While this benefit doesn’t affect all but the very rich, you never know – a lottery win is always a possibility.
- Tax Foundation: 2018 Tax Brackets
- CNN Money: New estate tax law gives an enormous gift to rich families
- CNBC: 10 tax changes you need to know for 2018
- IRS: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
- IRS: Retirement Topics - Beneficiary
- Forbes: The New 2019 Federal Income Tax Brackets And Rates