Tax benefits of marriage
The recent Supreme Court case challenging the constitutionality of the Defense of Marriage Act, which operates to disenfranchise homosexual couples legally married under state law for estate tax purposes, sheds light on the many tax benefits of marriage. Among these benefits is of course beneficial treatment for estate tax purposes, but there are a number of other important benefits that spouses and prospective spouses should keep in mind when considering the tax implications of their union.
For starters, situations where two spouses are making substantially different incomes can operate to bring the higher earner into a lower tax bracket then that earner would otherwise have been in were he or she not married. This of course operates to reduce the couple’s overall tax liability. Furthermore, one spouse can serve as the tax shelter of another where one spouse is losing money in a given year, or where one spouse incurs high medical costs, namely because that loss can operate a tax write-off for the other spouse. TurboTax, 7 Advantages of Getting Married, available at https://turbotax.intuit.com/tax-tools/tax-tips/Family/7-Tax-Advantages-of-Getting-Married-/INF17870.html.
There are also benefits with respect to individual retirement accounts; a spouse that is not currently employed can still contribute to an IRA account, even though that is not normally permitted for individuals that do not work. The threshold at which IRA benefits are phased out is also substantially higher for married couples, and where one couple is able to make pre-tax contributions to an IRA thus lowering his or her taxable income, both spouses can take advantage.
The maximum allowable charitable contribution deductions is also higher for married couples than for individuals, which may provide a substantial benefit for those couples seeking to claim such benefits. Estate tax benefits are also available to spouses, namely because the death of one spouse will result in a transfer of all of that spouses assets to the other without incurring any estate tax whatsoever. Finally, married couples should bear in mind that the ease of filing a single return constitutes yet another tax benefit of marriage.
While there are many tax benefits associated with marriage, there are several drawbacks as well, including the fact that one spouse is responsible for everything found on the joint return, whether or not they prepared that return personally. As a result, it is important to consult an experienced tax professional in order to learn more about the pros and cons of filing jointly with your spouse.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.