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Four Major Tax Benefits of Marriage

Marriage is a beautiful thing, and it comes with many perks, including multiple tax benefits for the happy couple. If you want to take advantage of these, you first need to know which ones to look out for and the eligibility requirements to get those benefits. Here are the four biggest tax breaks you can expect after tying the knot, plus tips for how to qualify.

Major Tax Benefits of Marriage

1. Your spouse’s losses could lower your tax burden

If your partner is self-employed, then their deductible expenses and business losses could help offset any income you’ve produced at your job if you file jointly.

However, if the losses are so significant that you two accrue debt, the interest rate you’ll pay could negate the tax advantages completely. Interest charges on debt can add up quickly and get you into a bad spot. If losses have put you and your spouse in debt, consider reworking the budget to cut costs and use a loan consolidation calculator to get back on track.

2. You’ll have more access to pre-tax retirement savings, even if your spouse is unemployed

All taxpayers are eligible for tax-advantaged retirement accounts like IRAs, even if they are unemployed or self-employed. If you or your spouse are unemployed, you can open a spousal IRA, and contribute funds from the sole earner’s income. By doing so and maximizing the contributions, you and your spouse can drastically reduce your Adjusted Gross Income (AGI) to the point that you may qualify for a lower tax bracket.

3. Your joint estate is protected from estate taxes

Estate taxes are levied against property that gets inherited by the next of kin of the deceased. These taxes can become an expensive burden quickly. However, the deceased’s surviving spouse is not subjected to these taxes since they’re considered to have joint ownership of all property. Should your spouse pass away, you can be assured that you’ll benefit from this tax law.

4. Filing jointly could result in a lower tax bracket

Congress recently enacted new rules that significantly reduced expensive tax rates for couples filing jointly. Previously known (unofficially) as the “Marriage penalty,” the tax laws at the time pushed couples who were each earning similar incomes into a higher tax bracket together than if they had filed separately, causing undue burden on families that filed jointly.

Now, if you and your spouse earn “substantially” different incomes, your tax bracket may reflect the lower-income level instead of higher, saving you thousands of dollars in taxes every year. However, if you and your spouse earn similar incomes, you may still be hit with the marriage penalty, so talk to your accountant about your options.

The bottom line

Marriage is a great institution. It offers couples the opportunity to grow and learn together while also providing many tax benefits. If you’re newly married and are filing your taxes jointly for the first time, ask your accountant whether you qualify for any of these four significant tax benefits to reduce your AGI and increase your tax return.

 

South Florida Caribbean News

The SFLCN.com Team provides news and information for the Caribbean-American community in South Florida and beyond.

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