5 Tax Advantages of Getting Hitched

Updated for tax year 2023.

If you recently got married or are thinking about tying the knot soon, it’s never too early to start thinking about the tax implications of marriage. Many times, getting married and filing jointly with your spouse can bring some nice tax advantages along with it.

At a glance:

• Filing jointly can be especially beneficial for couples with disparate incomes.
• You can gift as much cash to your spouse as you want without filing a gift tax return.
• Depending on your income, you may be able to qualify for more tax deductions or tax credits when you file jointly.

Here are five tax advantages married taxpayers may have to look forward to for tax year 2023:

1. You may pay a lower total tax if one of you earns significantly less.

If you and your spouse both work but one of you makes less money, the federal income tax brackets can work in your favor when you get married and file a joint tax return.

The tax code is written so that people who make more money pay a higher percentage of their income in tax. On the flip side, taxpayers who make less pay a smaller amount of federal income tax.

Say a person in a high-income tax bracket files jointly with someone in a much lower income tax bracket. Their income together is taxed at a rate somewhere in the middle. Generally, this results in a lower total tax than they previously paid as two single taxpayers.

2. Filing together can get you more deductions and other tax benefits.

For many people, getting married and filing a joint tax return allows for more tax deductions.

As an example, let’s say you have a business loss for the year and no other income. As a single tax filer, the tax benefits from your loss are slim to none. But if you’re married and your spouse earned a good income, your business loss can help offset your spouse’s income on a joint tax return. While you shouldn’t lose money as a tax strategy, it’s a good tax benefit if you endure a business loss.

Additionally, lower income levels limit deductions and credits when you file as a single person.

Let’s look at an example. Typically, you can only deduct up to 50% of your adjusted gross income (AGI) for charitable contributions. As a single person, this means that if you make a charitable contribution during a year where you earn less, the maximum deductible amount is lower. However, filing a joint return combines your income with that of your spouse. So, the total deductible amount for the same charitable contribution could be much higher. That helps save more on taxes.

On the other hand, your income as a single person can also be too high for some tax benefits. Many individuals often run into this problem when they try to take the American Opportunity Tax Credit (AOTC) for education expenses.

For tax year 2023, the AOTC starts to phase out when your AGI as a single filer reaches $80,000 and disappears when your income is $90,000 or above. But, if you are married filing jointly, these phase-out numbers increase to $160,000 and $180,000, respectively.

3. Filing jointly means unlimited gift giving and rights of survivorship.

If you’re not married and your significant other gives you more than $17,000 in a year (in 2023), they must file a gift tax return. After you marry, however, you can give each other as much as you like with no tax consequences (this is only true if you’re both U.S. citizens).

Likewise, when you die, you can leave as much money as you want to your spouse without generating estate tax. Special rules and limitation amounts apply to non-U.S. spouses.

4. Getting married lets you double the personal residence gain exclusion.

If you own a home that has gone up in value and file single, you can only qualify to exclude up to $250,000 in capital gains from your income. However, filing jointly allows you to exclude up to $500,000 in capital gains from the sale of your home. To qualify for this exclusion, you typically must own and live in the house for two of the last five years or meet a qualifying exception due to unforeseen circumstances — such as a job loss or natural disaster.

In the instance that you owned the house by yourself before you got married and sold it after tying the knot, only one of you must meet the ownership test. The same rule applies if you purchased the house while married, but only one of your names was on the deed. However, you can’t exclude the full $500,000 in this case. To exclude the total amount, you both must meet the residency period.

5. You only have to file one return, not two.

Filing only one tax return between the two of you can save you a lot of money. This is especially true if you combined a few finances before you got married and you’re used to sorting those out for tax purposes.

Now, as a married couple, filing jointly can greatly simplify the tax filing process — you won’t have to worry about details like who paid the property taxes or if a non-cash charitable contribution was from you or the other person. Instead, it all goes together on one income tax return.

The bottom line

If you gained some tax advantages by getting married recently, consider them a wedding gift from the IRS. From reducing overall tax liabilities to expanding tax deductions and simplifying the tax filing processes, there are several different tax benefits available for married couples. Before you file this year, make sure you understand the potential tax advantages available to you when you file jointly vs. separately to help you make informed financial decisions.

TaxAct^® can help you do this — we’ll ask you interview questions about significant life events, such as a recent marriage. Then, based on your individual circumstances, our tax preparation software will suggest the most advantageous tax filing status for you.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.