- Understanding California Tax Withholding on a Paycheck
- What Is the Difference Between Single & Married Withholding?
- What Happens if Your W-2 Says Single But You Are Married and Separated?
- One Spouse's Income Is Below $500: Do You Have to Claim It if Married Filing Jointly?
- What Status Can Married Persons With Dependents Claim on Their Taxes?
- IRS Rules for Married Filing Separately
The former so-called "marriage penalty" has been minimized since 2001, when tax changes eliminated some inequalities in the IRS code. While married couples with roughly equal incomes could land in a higher tax bracket, those couples with one spouse having significantly higher income than the other receive benefits. Advantages include double the standard deduction for individuals, more tax credits and lower total tax rates. The married filing jointly status carries these advantages, but married filing separately does not.
Married Filing Jointly
Filing jointly saves married couples money by giving them access to such benefits as additional tax credits, such as credits for educational loan interest, increased standard deductions, lower tax rates and the need to file only one tax return. You also keep all your personal retirement options available. One potential downside is deposit restrictions if one of the working spouses is covered by a qualified retirement plan at work.
Married Filing Separately
In most cases, you lose most married taxpayer advantages if you and your spouse file separately and both work. However, there is a situation where you might benefit. If one spouse owes a large tax bill, while the other qualifies for a substantial refund, it may behoove you to file separately. Should one spouse earn much more income than the other, while the lower income partner has large medical or other deductible expenses, you may have advantages by filing separately.
There is no way to ignore the reality that both spouses earning similar incomes increase their joint tax bracket. The IRS tax code, originally written when it was common for just one spouse to be working in a marriage penalized two-income marriages. In the early 2000s, IRS regulation changes minimized the former "marriage penalty." Instead of two-income married couples paying more taxes, more favorable tax-deduction rules, along with more generous tax brackets, offer advantages to married taxpayers when both spouses work.
Should you and your spouse -- which by the IRS definition must be of opposite sexes -- marry on or before Dec. 31, you are considered married for the entire tax year. You can, therefore, take advantage of the advantageous tax brackets for married persons filing jointly. Waiting another day, until Jan. 1 of the next year, allows you to use the unmarried classification for the previous year. You should calculate your taxes both ways before choosing a wedding date, if you have that flexibility. If both partners work you may have advantages in filing your taxes as married filing jointly.
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