Romantically Taxed: How Taxes Change When You Get Married

Are you married and have a Valentine? If so, you might want to think with your heart and wallet. With tax season in full swing, ATLAS CPAs & Advisors wants to provide you with the best information to evaluate whether you and your spouse should file separate or joint. There are benefits and drawbacks for either tax filing option. Listed below are some of the benefits and drawbacks to filing “married joint,” alongside some tips to make your tax filing process smooth sailing (just like your partnership in love)! ATLAS hopes this information is helpful in reaching your financial goals.

Special “Thanks” to our ATLAS Team Members who helped write this article: Robyn Yang, EA, Tax Manager of our ATLAS Denver Metro, CO location; and Keirsten DeGiovanni, EA, Senior Tax Associate of our ATLAS Westminster, CO location.

Benefits of Filing Joint (More Love = More Savings!)

• Standard deductions DOUBLE – filers may be in a lower tax bracket when combining incomes! This especially helps if one spouse makes significantly more money, because you can get more deductions in total.
• If you sell a home, your tax exclusions DOUBLE – This makes a huge difference on any capital gains tax you might incur.
• If only one spouse has taxable income, you save more money!
• Once your family grows, you will qualify for the Child Tax Credit (CTC), reducing what you owe by up to $2,000 per child. Ensure that they have a SSN, are under 17 years of age by the end of 2024, and are claimed as a dependent. (CTC’s can reduce what you owe, but cannot increase your refund).
• Up to $1,700 is refundable for 2024 with the Additional Child Tax Credit (ACTC), meaning if filers don’t owe taxes, this money is refunded to them.
• Separate filers may miss out on tax credits/deductions that joint filers receive, such as… (The American Opportunity Credit, Lifetime Learning Credit, Earned income credit, CTC is reduced in half, and tuition and student loan interest deductions etc..)

Drawbacks of Filing Joint (Love Spats Happen..)

• For joint AND separate filers, both spouses must do standard deduction. If one does an itemization, the other spouse must also itemize.
• Filers might not meet thresholds for medical bill deductions, making separate filing more financially beneficial (Your medical bills must meet 7.5% of your adjusted gross income to qualify, which can be skewed filing jointly if your spouses income surpasses your income and medical bills).
• Filing separately will result in a lower income and could lower your repayment plan on student loans. However, filing separately may remove your eligibility for potential student loan deductions. ATLAS CPAs & Advisors can help you evaluate your loan debt and income to see if you save more money filing separate or joint.
• Filers take on your spouses financial liabilities and your own (But true love conquers all!)

When Can You Make the Switch? (Wallet Meets Wallet)

• The IRS must know that you are legally married by Dec. 31st of that tax year to be able to file jointly or separate.
• ATLAS Advisors can help you to evaluate these metrics to see if separate or joint filings are better for your financial needs.
• ATLAS CPAs can simplify your tax troubles and ensure you’re getting the best returns possible while maintaining your financial goals.
• If you think you could’ve saved more on past returns by filing joint or separate, tax returns conducted up to 3 years prior may be amended and switched from filing joint or separate.

At ATLAS CPAs & Advisors, we truly want our community to gain financial success. Every love story is unique, just like every client! Find out if one or more of our services are right for you, and we can tailor each step to help you attain your financial goals.

Some insight from this article was gathered from: https://turbotax.intuit.com/tax-tips/marriage/should-you-and-your-spouse-file-taxes-jointly-or-separately/L7gyjnqyM#GoTo-What-about-Married-Filing-Separately-