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Did "Juno" Your Tax Bill Could Go UP (Or Down) Next April By Getting Married In 2010?


September 16, 2010

June has traditionally been the most popular month for weddings. Most believe it’s because of the nice weather but the tradition seems to go back to the times of ancient Rome and the mythical goddess named Juno. Juno was known as the “goddess of marriage,” so many chose to honor her by getting hitched in June.

But whether you are honoring Juno or just taking advantage of nice weather, if you are getting married anytime soon, you need to know how it could affect your tax bill (for better or worse).

The Marriage Penalty

Depending on you and your new spouse’s circumstances you could be subject to the marriage penalty. The marriage penalty has nothing to do with irritating in-laws and is not an actual penalty per se. It’s more of a quirk in our tax system where some married couples pay MORE taxes by filing a joint return with their spouse than when they were single.

Although the “penalty” of marriage seems to get all the attention, you could receive a “tax bonus” for being married and filing a joint return. Whether you benefit or are penalized for marriage depends on both your income levels and filing status.

If you and your spouse both earn higher than average incomes ($80,000+) you could pay a higher total tax bill for filing jointly. Your joint incomes could bump you into a higher marginal tax bracket than when you filed single. On the other hand, you could receive a marriage bonus if you have disparate incomes.

Tax laws in recent years have eliminated the marriage penalty for most tax payers in lower brackets. The legislation that eliminated the marriage penalty for lower brackets is in effect only through the year 2010 and must be approved by Congress to continue.

Choosing Your Filing Status

Your status on the last day of the year determines your tax filing status for the entire year (even if you get married on New Year’s Eve.) You and your spouse have the option to choose whether to file joint or separate returns. When you file at PRO-TAX, we automatically calculate your return both ways to see which filing status benefits you the most. 

Here are the differences to consider when filing jointly or separately:

Filing a joint return:

  • You report your combined income and deduct your combined allowable expenses.
  • Your tax may be lower than your combined tax for the other filing statuses.
  • You may qualify for tax benefits that would not apply if you filed separately.

Filing separate returns:

  • You generally report only your own income, exemptions, credits and deductions on your individual return.
  • You claim an exemption for your spouse if your spouse had no gross income and was not the dependent of another person.
  • You generally pay more total tax on two separate returns than on a joint return because you are not allowed to claim certain credits and deductions.

The Loss of Excess Capital Losses

If it isn’t bad enough to lose money on marginal rates, another “marriage penalty” comes when a married couple has Excess Capital Losses (like from the stock market). A single tax payer is allowed to offset capital gains against any capital losses, and deduct any “excess capital loss” up to $3,000. Two single people with excess capital losses can deduct up to $3,000 each (or $6,000 total), but a married couple can only deduct $3,000.

Deductions: Standard or Itemized

To minimize your tax bill, you should use the deduction method that offers you the largest tax break. The basic idea is to itemize your deductions when they exceed the Standard Deduction.  PRO-TAX will be happy to assist you in deciding which method “keeps the most money in your pocket.”

What You Should Do Before Saying “I Do”

If you would like to know how marriage will affect your future tax bill, you should schedule an appointment with PRO-TAX to review your prior year's tax returns. We will provide you a Free Tax Analysis of your situation and will also review your return for any errors or mistakes. To schedule your Free Tax Analysis, call PRO-TAX today at 1-800-809-2829.