What Are Marriage Tax Laws And Do They Help?

Marriage impacts every area of life. One of the ways that marriage impacts life is in the area of taxes. Still, tax laws often seem to favor people who are single over people who are married. In recent years, marriage tax laws have changed to help to balance out the situation.

Many couples file taxes under what is called “filing jointly.” This is the most common way that married couples file taxes. Filing jointly is best under a variety of circumstances, including:

- The tax rates for people who are married and filing jointly are lower than those who are single

- If there is a disparity between incomes, there is a lower tax liability

- filing jointly means you only file one tax return instead of two tax returns.

- filing jointly may make you eligible for a variety of tax credits, including educational tax credits and expenses related to the care of dependants.

Somewhere around half of the couples that file jointly, in the end, pay what is referred to as a marriage tax penalty. This happens most often when both husband and wife earn somewhere near the same income. This can push the couple up into a higher tax bracket; it can also cause them to actually pay more in taxes than if they were not married and were filing on their own.

Recent laws have attempted to deal with this marriage tax penalty. Your tax preparation expert can help you to best figure out what method you should use to file your taxes. In some cases, it may benefit a couple to file as “married, filing separately,” but this carries specific disadvantages as well.

The downside to filing as married, filing separately can make this no better than filing jointly. The disadvantages can include:

- By filing separately, you may lose certain tax credits, such as education credits and the earned income tax credit.

- If you file separately and your spouse does not work, your spouse will not be allowed to contribute to an Individual Retirement Account (IRA).

- Filing separately might save you money on your federal tax return, but it could also wind up costing you substantially more in state and/or local taxes.

Posted in Relationships