Bill Bischoff of MarketWatch offers tax advice for newly married couples. Typically, it is recommended that you file taxes jointly, but there are exceptions to this rule:
- Find out of your spouse has previously underreported their federal income taxes. If so, you could be liable and it would be better to file jointly. Remember that this tax liability could still stick to you even if after a divorce.
- If both of you earn similar, healthy incomes, then you might be faced with a marriage penalty. Bischoff’s example was a couple who each earned $85,000 in taxable income. By filing jointly, they would be taxed at the 28% income tax rate bracket, but individually be taxed at the 25% income tax rate bracket. That would come out to a tax penalty of $708, but that could be negated by tax credits earned by being married.
When looking at filing jointly, there are many benefits that you could potentially enjoy. This includes the child care and higher education tax credits that you could be eligible for. It is also simpler where you only have to file once and do not need to distinguish what tax credits, deductions, and income that you would be eligible for individually. An additional bonus would occur if both of you own a home. By selling one of the homes at a profit, you would be eligible for writing off that gain up to $250,000 on your taxes. That would lower your tax liability.
Before you tie the knot, loosen your tax liability through using these helpful tips.
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