Like with any major life decision, marriage is one in which the financial implications must be taken into consideration before a final decision is made. In some instances, delaying your marriage until the following year may help you out financially. On the other hand, accelerating your marriage plans and having them take place in the current year may also be more financially beneficial. Advancing or holding off your marriage for financial gain isn’t cut and dry – all situations are heavily based on the taxable income amounts of the two individuals tying the knot.
Your marital status at the end of the calendar year, December 31, takes precedence over the whole year. For instance, if you were married on December 28th, 2014, you would be considered married for all of 2014 for tax reporting purposes.
Below are examples of possible financial impact couples may experience when getting married:
In 2015, if you are an unmarried individual, the lowest amount of income that will place you in the 28% tax bracket is $90,750. However, a married couple who files jointly will begin to be taxed in the 28% tax bracket for any amount over $151,200. So in this case, the two individuals could stay unmarried and make up to $90,749 of taxable income each and not be taxed in the 28% tax bracket.
If they both made up to $90,749 of taxable income and were filing a married filing jointly return, the amount of taxable income over $151,200 would be taxed at the 28% rate. Calculations show the tax on the excess would be around $8,483.
If two individuals are preparing to get married and one of them has significantly higher income, it may work in their favor to get married in the current year. For the soon to be married couple, if one person has $25,000 of taxable income and the other has $525,000 it would benefit them to get married in the current year and file jointly. Here’s why: If they were to get married in the current year and file married filing jointly, they will be taxed a combined $163,715. However, if they were to hold off on the wedding and get married in the next year, they would be taxed a combined $167,577. That is close to a $4,000 difference! Along with different tax brackets, other tax saving deductions based on adjusted gross income can play in their favor. Some of these deductions deal with the AGI phase-out for making deductible contributions to traditional IRAs, interest on qualified education loans, the 3.8% investment surtax, and the additional 0.9% Medicare tax.
Marriage is a decision that affects many different aspects of one’s life. The initial decision of if and when you plan on getting married can possibly have an effect on your financial situation, specifically relating to tax liability. Before making the big decision, give us a call at 702-870-7999 to schedule an appointment with a Las Vegas tax accountant.