Ahh love. It’s a beautiful thing. An indescribable feeling that brings fulfillment and joy to our lives. And now I will state something terribly obvious. Here it goes. Many cases of love often results in marriage. Just in case you didn’t know.
Many do not realize, but getting married can have a tremendous impact on your financial situation. More specifically, marriage will almost always affect your tax return. These financial ramifications are pretty vast. So much so, that covering it all in one article would not be practical. I am one that likes good news first so here are the tax benefits of getting married.
1. The generous couple gets higher deductions. A charitable couple can have more of a beneficial impact on your taxes than a charitable single. This is so because the limit of charitable deductions is increased when you get married.
2. The Stay-at-home Mom/Dad can have an IRA. In other words, an unemployed spouse can contribute to an IRA. As we know from previous blog posts, contributing to an IRA can reduce tax liability and boost your refund. Furthermore, the threshold at which IRA benefits are phased out relative to your income is significantly higher for married couples versus single filers.
3. The shelter spouse. A tax shelter is a legal means for a taxpayer to reduce their taxable income. A spouse can be exactly that. For example, Jake’s wife, Anne owns a hair salon that is losing money. This loss can reduce the tax liability of both Jake and Anne. This is not an endorsement to marry someone who has a business that is losing money just to save money on your taxes.
4. Cutting expenses. It goes without saying that two living spaces costs more than one. In most cases, the same holds true for tax returns. Many times a married couple will save money because they no longer have to pay for two separate returns.
5. Estate Protection. An estate can be left by a deceased spouse to the surviving spouse without generating estate tax. So a tax exemption allows Anne to leave her fortune she built with her turned-around-hair-salon-empire to Jake without incurring an estate tax.
I know what your thinking. This is supposed to be a happy time and I have a florist to call. But believe it or not, marriage is something you should discuss with your accountant and/or financial consultant before it is etched in stone. Even the date you pick can affect your tax return. We will be introducing a new consulting arm of L&A that is not yet named and I encourage all of you to take full advantage of it once it is introduced. We will also compose more articles discussing marriage and it’s implications on your finances and taxes. Thanks for reading.