Are you and your partner curious about the tax benefits of marriage?
With marriage, a couple can combine their earned income and reduce their tax burden. If you’ve been unsure of whether to marry your partner, you should at least consider the tax benefits!
This guide will show you the benefits of being married vs living together. You’ll also learn about why you should consider filing taxes jointly.
Here’s what you need to know:
Lower Your Tax Bracket
There was once a marriage penalty that pushed a married couple to a higher tax bracket when their income got combined.
Now, a married couple can lower their tax bracket by filing taxes jointly.
The marriage penalty hasn’t completely gone away. However, if there is a huge disparity between the couple’s earnings they can get placed in a lower tax bracket.
This is a major benefit of filing taxes jointly as a married couple. You might owe a lower percentage of your earnings in income tax. This can be a complex process so you want to look into tax preparation outsourcing if you’re looking to reduce your tax burden.
You likely look through your receipts each year to see what you can deduct from your tax burden. Often, we look at charitable donations to see if we can deduct this from our income tax.
Married couples can get greater deductions from charitable donations. As a general rule, charitable donations can deduct up to 50 percent of your tax burden.
For married couples, you might be able to increase this deduction rate. For 2021, you can get up to $600 per tax return. Compare this to only $300 for other tax filing statuses.
Say ‘No’ to Estate Tax
If you’re married, you’ll get to protect your assets and estate from the tax authorities!
Under the current federal tax laws, you won’t have to pay any estate tax if you leave your assets to your spouse. This is crucial if you want to ensure you can protect your wealth even after you’ve passed away.
The estate tax can be a huge burden to your heirs. If they don’t pay the estate tax, they might not be privy to your assets. Marriage helps protect your heirs from this harsh tax.
It’s More Efficient
One of the biggest stresses of filing your taxes is how long it takes. But when you file a joint tax return, you’ll only have to file a single return.
It’s a lot more affordable to prepare one tax return as well. It’s also less complex than having to look at two different incomes.
This gives you more time to focus on your life and your career. Many Americans can lose valuable time just on filing their tax returns! This helps you save more income as you won’t have to shell out several hundreds or thousands to an accountant!
You’ll also find that the tax rules are easier to understand for married couples. This will save you time having to plan ahead to reduce your tax burden while remaining compliant!
Did you know that your spouse might serve as a tax shelter? For example, if your spouse has been losing money this can lower your joint tax return.
A married couple’s income is given leeway that single incomes aren’t given. If you can show that, as a couple, you’ve been losing money, you might get a reduced tax burden.
As a general rule, a single taxpayer can’t fund an Individual Retirement Account (IRA) if they don’t have paid work. However, if you’re married then the rules are more favorable.
If one person in the marriage isn’t earning income, they can still contribute to their IRA from the spouse’s earnings.
Each person will have their own IRA. They can also receive many tax benefits when they hold an IRA while being married. In most cases, you can receive tax deductions by making contributions to your IRA.
If you want to start saving for your retirement, an IRA is one of the best ways to do so. As a married couple, you’ll get the most out of your IRA by reducing your tax burden.
Shop Around for Tax Benefits
As a married couple, you’ll get to shop around for different tax benefits. Your employer might offer you a few benefits.
You might be able to distribute these benefits between you and your spouse. These benefits can lower your tax burden. For example, a married couple with children or other dependents can get many tax breaks.
This is a great way to receive benefits from your employer and pay less money in taxes.
Build Your Wealth
You might have heard that building wealth isn’t about what you earn, but it’s about what you keep. Lowering your tax burden helps you build your wealth and achieve financial freedom.
Many people wrongly think that getting married will hurt their wealth. But being married can help you preserve your wealth in ways that remaining single can’t!
You’ll have two different incomes that you can combine to keep in a bank account. You can keep this money in an account that generates interest. While interest income is taxable you might be able to get a reduced tax burden from your marriage.
You can also keep your wealth in a trust or family office that brings many tax benefits. This means that you’ll save and generate income without having to give away too much to Uncle Sam!
Those Are the Tax Benefits of Marriage
Now that you know the tax benefits of marriage, you should consider taking advantage of this institution to lower your tax burden!
You can lower your tax bracket based on your joint income. This alone helps you keep more of your hard-earned money. It’s also a lot more efficient to file a single tax return.
You also get more options to deduct your charitable donations to reduce your tax burden. You can also eliminate your estate tax.
You can find more tips on reducing your taxes on our website!