While marriage itself is not a taxable event, getting married does involve positive and negative consequences for your tax status. An understanding of how the Internal Revenue Code works, however, can help you maximize the advantages and minimize the disadvantages. Many tax benefits of marriage apply only if you file jointly with your spouse.
Tax Brackets and Filing Jointly
When you file jointly with your spouse, you both may be forced into a higher tax bracket, especially if you both earn about the same amount of money. The Jobs and Growth Tax Relief Reconciliation Act of 2003 helps with this problem by increasing the standard deduction for married couples filing jointly, and by raising the maximum income for the 15 percent tax bracket for such couples. Nevertheless, it is still possible to end up paying a tax penalty for filing jointly with your spouse. You are not required to file a joint tax return with your spouse — you may choose to file separately. Filing separately, however, splits the maximum available claim under certain tax deductions — each spouse is eligible for half.
If you file jointly with your spouse and your spouse prepares your return, you will be jointly liable for any errors made by your spouse that result in tax underpayment. This liability extends to penalties and interest in addition to tax underpayment. If your spouse has no assets, the IRS can even seize your property to pay the entire debt. In fact, the IRS can come after you even if you are divorced by the time the IRS learns of the underpayment. Relief from this liability is sometimes available under the "innocent spouse" provisions of the Internal Revenue Code.
Sale of Your Home
Normally, you are taxed on any profit you make from selling real estate. As of 2012, however, you need pay no federal taxes on your first $250,000 in profit derived from the sale of your personal residence. This exemption increases to $500,000 if you are married and file jointly with your spouse.
Under the rules for traditional IRAs — as opposed to Roth IRAs — you can only contribute to the extent that you have earned income. Normally, this means that you must be working to be eligible to contribute. If you are married but not working, however, your working spouse can contribute to your IRA. This tax benefit is revoked if you and your spouse legally separate.
If you die in 2012, your estate will have to pay a federal estate tax of up to 35 percent on the net value of your estate that exceeds $5.12 million. Although the estate tax exemption varies from year to year, your heirs share only in whatever is left after the estate tax is paid. You can, however, leave your estate to your spouse tax-free, meaning that no estate tax will be imposed on the estate until she dies.
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.