I got married 5 months into 2016. I make $100,000 a year. My wife was making $50,000, but was laid off in July. She’s now on unemployment insurance. We lived together before marrying, filing individual returns. Now that we’re legally tied, which is better to pay less taxes? Do we file jointly or continue to file separately until 2017? Is there such a thing as a tax penalty when couples tie the knot?
First things first. For tax purposes, anyone who was married on or before Dec. 31, 2016 was married for the entire year. Your choice now is between married filing jointly and married filing separately.
Your tax generally will be less if you file jointly, says Michael W. Alderman, a Melville tax accountant; but not always. For example, say you have big medical expenses. Medical expenses are only deductible to the extent that they exceed 10 percent of adjusted gross income. Expenses that don’t reach that threshold on a joint return’s combined income may be deductible on separate returns if one spouse has low income.
Whether you have higher or lower taxes after marrying — aka a marriage penalty or a marriage bonus — depends partly on the difference in your incomes, he says. Very similar incomes usually result in a marriage penalty, and significantly different incomes in a bonus: “Two people who each make $100,000 a year typically pay more tax as a married couple making $200,000. But they may have a marriage bonus if one makes $150,000 and the other makes $50,000.” Deductions can create bonuses too, notes Alderman. From a tax standpoint, for example, a person who has a big capital loss carryforward is a perfect match for a person who has a substantial capital gain.
THE BOTTOM LINE Getting married may boost or trim your tax bill, depending on your circumstances.
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