Marriage does not only come with a life partner, but also with some tax benefits. A married couple that files a joint tax return will often find that their taxes owed are lower than that of their unmarried colleagues.
There are certainly exceptions to the rule, but most people with average incomes will see some benefits by being married and filing jointly.
These benefits are also extended to retirement plans because they offer various perks or opportunities for married couples to get a jump on retirement savings. Below are some unique tax benefits that married couples can enjoy.
Individual Retirement Accounts, or IRAs, help you to make contributions towards your retirement. One of the eligibility requirements for making a contribution to an IRA is that you must have taxable income. However, there is an exception to this rule for married couples who file joint tax returns with a spouse who has taxable income.
According to this law, the spouse who has taxable compensation is permitted to contribute to an IRA account of the spouse without a taxable income. This is referred to as a Spousal IRA whereby the nonworking spouse funds their IRA using the income of their partner.
Marriage Tax Rates
There are different tax rates for individuals and married couples filing jointly. For example, a single person earning $50,000 per year in 2022 tops out at the 22 percent tax rate. However, if this person marries someone earning $30,000 each year, their total income is $80,000, but their joint income will top out in the 12 percent rate as long as they jointly file their tax returns. In effect, you can together earn more money while paying a lower tax rate.
Higher Income Limits for Tax Deductions and Credits
The IRS usually rewards all taxpayers with an automatic deduction on their taxable income. This is known as the standard deduction. When filing 2022 taxes, a single taxpayer will enjoy a standard deduction of $12,950 while a married couple that files their returns jointly would get twice this amount at $25,900.
Plus there are plenty of opportunities for couples filing jointly to itemize deductions and go above and beyond the standard deduction. This becomes increasingly valuable when a couple buys a home and pays mortgage interest, have children that require day care, or have older children preparing for college.
Couples who file together mostly receive higher income thresholds for certain tax credits and deductions and this means they can often earn a larger amount of income and still potentially qualify for certain tax breaks.
Tax Benefits for Child
Many people in marriages are blessed with children. While raising children can be expensive, the IRS has some tax benefits available when raising dependents that help with these financial costs. For tax year 2022, the Child Tax Credit is worth up to $2,000 per qualifying dependent under age 17. This credit is partially refundable up to $1,500 – which means it could reduce your tax bill dollar-for-dollar or you may be able to get a tax refund.
There is also the Child and Dependent Care Credit, a credit used to pay for expenses for the care of a child or dependent that enable you to work or look for work. The credit is up to $1,050 (35% of $3,000) for one child under 13 (no age limit if disabled) and up to $2,100 (35% of $6,000) for two or more children under 13 (no age limit if disabled).
Sure, having children and getting married costs far more than these tax breaks, but when it comes to paying taxes you still want to get every tax deduction and credit you’re entitled to.
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