THE MATRIMONY OF MONEY (AND THE IRS) by Nesha Pai You are married! Congratulations! All those months of planning, the details, the dress and then finally, the honeymoon. Marriage to the right person can be dreamy but it is still a work in progress as two people come together to build one life together. Marriage is not only about combining lives, households, and calendars, but is also about combining your bank accounts. The two become one. Now, for some of you progressive types (like myself at this point in my life), I plan on keeping my own bank account and would hope to create a joint account we both contribute to for household expenses. Regardless of having separate bank accounts, the IRS looks at you as one. A joint couple. Now, you can file separately in cases of a substantial income difference between you and your spouse but you will pay for it by being in a higher tax bracket. If you are going to be filing your taxes jointly for the first time, know that you get tax breaks by filing Married Filing Jointly (MFJ). Isn’t that so romantic of the IRS? First off, filing one return is less hassle and less expensive. Here are some of the other benefits:
HIGHER STANDARD DEDUCTION
HIGHER IRA CONTRIBUTIONS
Filing on one return gives you double the standard deduc-
Single individuals who aren’t working generally cannot con-
tion (if you don’t have substantial itemized deductions that are
tribute to an IRA. But if a couple is married and one spouse
greater, this is a good one). In 2022, the MFJ standard deduc-
isn’t working, the non-working spouse can contribute to an IRA
tion is $25,900. The term standard deduction refers to the por-
using joint income and having two separate IRA plans.
tion of income not subject to tax that can be used to reduce your tax bill. The IRS allows you to take the standard deduction if you do not itemize your deductions.
BETTER CREDITS
PRINCIPAL RESIDENCE EXEMPTION
If you own a home with your spouse, you may be able to pocket more of the proceeds from its sale.
Married couples filing jointly may qualify for a number of tax
The personal residence exemption is an Internal Revenue
credits they would not have if they filed separately, including
Service (IRS) rule that allows people (who meet certain criteria)
the Earned Income Tax Credit, Child and Dependent Care Tax
to exclude up to $250,000 for single filers or up to $500,000
Credit, and American Opportunity and Lifetime Learning Edu-
for married filing jointly in capital gains tax from the profit they
cation Tax Credits.
make on the sale of their home.
ESTATE PRESERVATION
The above is just a brief summary of how it can benefit you to file jointly as a married couple. It is wise to talk to your financial
Married couples can leave an unlimited amount of money to
advisor and your tax CPA to make sure you are maximizing all
their spouses without generating any estate tax. This can protect a
of the benefits. Relish the tax break as much as you relish the
wealthy decedent’s estate until the death of the surviving spouse.
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