It’s hard to think of a less romantic topic than tax planning but if you and your honey are considering to “tie the knot” here are some tax consequences that you should be aware.
Marriage Penalty or Marriage Bonus?
In particular, the test is geared toward telling you whether you’ll pay a marriage penalty or get a marriage bonus. Because married filers have different tax brackets than single filers, you can’t assume that your tax liability after you marry will be the sum of the taxes from your individual returns. Some of the important factors involved include the following:
- Couples where both spouses work are more likely to owe more in taxes than they would if they weren’t married, because once you get above the 15% bracket, thresholds for higher tax rates on joint filers are less than double the rate thresholds for single filers.
- Single-earner families, on the other hand, are more likely to get a marriage bonus, because the working spouse gets to take advantage of deductions and exemptions for the non-working spouse, and the family gets to enjoy lower tax rates on more overall income.
- For high-income taxpayers, marriage can be especially costly because special provisions like exemption and deduction phaseouts and the Medicare surcharge tax start applying at levels that aren’t much higher for couples than they are for singles. For instance, the Medicare surcharge applies to singles with incomes of more than $200,000 and couples earning $250,000.
Also, don’t think you can beat the penalty by choosing the married-filing-separately option. Spouses who file separately get less favorable treatment than singles as many of the exclusions and deductions are evenly split.
Given the complexity of this area, one would be best served by seeking tax counsel to make sure that you are getting the maximum tax benefits. Contact the Law Offices Of Jeffrey B. Kahn, P.C. with locations in Los Angeles and elsewhere in California.
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