Being married is more than simply saying I do and living your new life with the person you love. Marriage changes everything, even your taxes. In order to ensure you and your partner start off financially responsible, it's a good idea to familiarize yourself with some of the changes you should expect when you begin filing your taxes as a married person.
Income and Tax Rate
Most people understand that the rate at which you are taxed is based on your income. However, most people don't have a clue just how much an increase in their income can affect their rate. For example, you and your spouse have an annual salary of $45,000. As single people, you were taxed at a rate of 15%.
As a couple, your new combined income is $90,000. This income level comes with a tax rate of 26%. In simpler terms, your tax penalties will go from $6,750 a piece to $23,400 as a couple. While any tax credits you qualify for and any expenses can help lower this number, make certain you and your new partner are factoring this additional tax expense into your budget just in case.
Spouse transfers can aid in lowering you or your partner's tax liability. If you or your spouse have non-refundable tax credits that you use partially or not at all, there is an option to transfer these credits to the other spouse in order to lower their liability.
For example, say you can deduct $4,000 in tuition expenses each year. However, you only have a tax liability of $2,000. You can apply $2,000 of these credits to eliminate your liability and transfer the remaining $2,000 in credits towards your partner's liability. Keep in mind, only certain non-refundable tax credits are transferable.
If your partner was to lose their job at any point during the year, it's important for you to understand spousal amount. Spousal amount is a tax credit that is applied when one spouse has to support the other spouse. If the supported spouse has a net income less than $11,138, the supporting spouse can receive a credit equal to the difference between the supported spouse's income and the $11,138.
For example, if your spouse had a net income of $5,000, you could receive a credit of $6,138 to apply towards your liability. If the working spouse has a high income, this credit can really help to lower their tax liability.
As an important part of your financial responsibility, it's imperative that you take the time to understand the changes being married will impose on your taxes. An accountant can assist you with further understanding these implications and benefits. Click here for more information on accounting services.