Tax Benefits for Married Couples
It’s a common question we get as financial professionals: what are the financial advantages of getting married?
When two people decide to tie the knot, it’s often seen as the start of a new chapter filled with love, partnership, and shared dreams. However, marriage can have a big impact on a couple’s financial situation, especially in how they file their tax returns and how much tax they’ll pay.
As a young, successful individual, you’re likely focused on building your career and secure financial future. And while marriage might not be the first thing that comes to mind when you think about tax savings, it can offer significant benefits.
In this blog, we’ll explore what are the tax breaks for married couples and why it might be worth considering beyond the usual reasons.
Tax Benefits of Marriage
1. Lower Tax Bracket
When it comes to taxes, your income determines which tax bracket you fall into, meaning the more you earn, the higher the percentage the government takes. However, there’s a tax benefit of being married; if you’re married and filing jointly, these tax brackets can actually work to your advantage.
Let’s say you earn $80,000 annually as a single filer; your income would place you in the 22% tax bracket for 2024. Now, let’s say you’re married and filing jointly. If you earn $80,000 and your spouse earns $70,000, your combined income would fall into a top tax bracket of 22%. This lower tax rate for couples filing jointly can make a significant difference in how much of your hard-earned income stays in your pocket.
Take a look at the table below for a clearer view of how filing jointly can reduce your tax burden, especially on higher income.
| Tax rate | Single | Married filing jointly | Married filing separately | Head of household |
| 10% | $0 to $11,600 | $0 to $23,200 | $0 to $11,600 | $0 to $16,550 |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 | $11,601 to $47,150 | $16,551 to $63,100 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 | $47,151 to $100,525 | $63,101 to $100,500 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 | $100,526 to $191,950 | $100,501 to $191,950 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 | $191,951 to $243,725 | $191,951 to $243,700 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 | $243,726 to $365,600 | $243,701 to $609,350 |
| 37% | $609,351 or more | $731,201 or more | $365,601 or more | $609,350 or more |
2. Tax Shelter Opportunity
If your spouse owns a business that isn’t profitable yet, filing taxes separately could mean missing out on valuable deductions. However, filing jointly can create a tax advantage for the couple.
The spouse who is earning an income can use their partner’s business losses to reduce their taxable income. On top of that, they can also claim additional deductions for mortgage interest, medical expenses, and state and local taxes (SALT). This strategy allows the couple to maximize their tax benefits, ensuring they keep more of their Money working for them.
3. Expanding IRA
Funding an individual retirement account (IRA) isn’t an option if you’re single and not earning a paycheck. However, once you’re married, you may be able to contribute to an IRA using your spouse’s income.
The IRS allows each spouse to make a tax-deductible contribution up to the annual limit of $6,500 for 2023 and $7,000 for 2024. If you’re 50 or older, you can contribute an extra $1,000 annually. As a married couple, you can double your family’s tax deduction each year by taking advantage of a spousal IRA.
Higher-income earners who might be ineligible to contribute to a tax-deductible IRA due to income limits may also become eligible again in marriage. This is because the income phaseout limits are significantly higher for married couples who are filing jointly.
4. FSA Contributions
If you and your spouse are professionals with separate health insurance plans through your employers, you can use a smart strategy to lower your annual health care costs. By taking advantage of both your flexible spending accounds (FSAs), you can maximize your savings and keep more of your hard-earned money.
FSAs let you set aside pretax money from your paycheck to pay for medical expenses not covered by insurance, like copays and deductibles. This means you’re saving money based on your tax rate.
For 2023, the IRS allowed you to contribute up to $3,050 per person to your FSA. That’s $6,100 for a married couple. In 2024, the limit went up to $3,200 each or $6,400 combined. Just remember, you can’t use both FSAs for the same expense; each one needs to be used separately.
FSAs are “use it or lose it.” This means any money in the account at the end of the year is gone. To avoid this, try to estimate your medical expenses from the past year so you don’t over-contribute.
5. Maximizing Employer-Sponsored Benefits
Another tax benefit of being married is that if you and your spouse have employer-sponsored benefits, you can combine the best features from both plans to maximize your benefits. This approach not only helps you get the most value but can also boost your tax savings.
By carefully selecting the most valuable benefits from each of your plans, you can create a customized package that works best for your financial situation and Lifestyle. This strategy ensures you’re making the most of your benefits while optimizing your tax savings.
6. Estate Preservation
If one spouse passes away, their entire estate can be transferred to the surviving spouse without incurring any federal estate taxes. This tax benefit allows married couples to protect and preserve their wealth for the future, ensuring that their assets remain intact and are passed on without any hassle.
7. Increased Standard Deductions and Credits
If you’re married, filing your taxes jointly can offer significant financial advantages. Here’s why:
- Double your standard deduction: Married couples filing jointly can claim a standard deduction twice the amount available to single filers. This means more of your income is tax-free.
- Access more tax credits: Joint filers may qualify for tax credits like the Child and Dependent Care Tax Credit and the American Opportunity Tax Credit, which can further reduce your tax liability.
- Increase your charitable giving limit: When you file jointly, you can deduct a larger portion of your charitable contributions. This allows you to support your favorite causes while minimizing your tax burden.
By filing jointly, you can maximize your deductions and credits, making it a smart choice for many couples looking to optimize their tax situation.
8. Convenient Tax Filings
One of the biggest tax benefits for married couples is filing their taxes jointly. This can save you time and money. Instead of preparing two separate returns, you only need to deal with one. This can significantly reduce the stress and hassle of tax season.
| Note: When you file jointly, both spouses are equally responsible for any errors or omissions on the return. This shared liability includes any mistakes or inaccuracies, so it’s crucial to ensure everything is accurate. However, you’re not liable for your partner’s pre-marital tax errors. |
What is the marriage penalty and the EITC?
It’s important to be aware of the potential marriage penalty when it comes to the earned income tax credit (EITC), especially for low-earning couples. This refundable tax credit is designed primarily for working parents with children, but it comes with income limits that can impact your eligibility.
Once a couple’s income surpasses a certain threshold, they can no longer claim the EITC. For instance, in 2022, a married couple with one child will lose eligibility if their combined income exceeds $49,622.
What’s interesting is that the income limits for married couples aren’t simply double those for single filers. For 2022, a single taxpayer with one qualifying child has an income limit of $43,492, while the limit for married couples with one child is $49,622. This means that getting married can sometimes mean losing out on this valuable credit, even if you might not expect it.
Understanding the potential impact of the marriage penalty is crucial for making informed financial decisions. If you’re concerned about how marriage might affect your EITC eligibility, it’s recommended to consult with a tax professional for personalized advice.
Final Words
As Elliot wisely said, “As your life evolves, so too will your priorities.” Marriage is a significant life event that can greatly influence your financial landscape. Understanding the tax benefits of being married—such as potentially lower tax brackets, increased standard deductions, and opportunities for tax sheltering—can help you make the most of your union.
At Prosperity Financial Groups, we guide young and successful individuals in understanding tax advantages and financial strategies. With us, you can optimize your tax strategy, ensure a secure financial future, and fully understand the advantages of getting married from a financial perspective. We aim to help you maximize your tax breaks for married couples and achieve lasting financial prosperity.
If you’re curious about the financial advantages of getting married, reach out to us at Prosperity Financial Groups. Here, you’ll find relevant answers to your questions.
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