Tax Benefits Of Marriage: How Couples Can Save Money In 2023
Marriage is a big step for anyone and for many couples, it is about more than just love. Getting married can also come with a number of financial benefits, including tax breaks. While the tax laws are constantly changing, there are still some tax benefits of marriage that couples can take advantage of in 2023.
Filing Status Changes
One of the most common tax benefits of marriage is the ability to change your filing status from single to married. This can mean a lower rate for couples when filing their tax returns. Furthermore, some couples may qualify for a head of household filing status, which can provide additional savings over the standard married filing jointly option.
Joint Returns and Deductions
When married couples file a joint return, it can result in significant tax savings. This is because married couples are often able to claim more deductions than single individuals. Additionally, joint returns can make it easier for couples to take advantage of tax credits such as the Child and Dependent Care Credit, the Earned Income Credit, and the American Opportunity Tax Credit.
Income Splitting
Another major tax benefit of marriage is income splitting. This is when couples spread their income among each other to take advantage of lower tax brackets. For example, if one spouse earns a high income, they can transfer part of that income to their partner. This can result in lower tax payments overall. The IRS does have rules in place to prevent couples from taking advantage of this strategy, but it is still a valuable tool for many married couples.
Tax Deductions for Spouses
Married couples are often eligible for tax deductions that are not available to single individuals. For example, if one spouse is a student, they may be able to deduct their tuition and fees from their taxes. Additionally, if one spouse is self-employed, they may qualify for a deduction for health insurance premiums.
Estate Planning Benefits
Marriage can also offer some tax benefits when it comes to estate planning. Married couples can use a special type of trust known as a Qualified Terminable Interest Property trust, or QTIP, to transfer assets between them without triggering estate taxes. Additionally, if one spouse dies, the surviving spouse may be able to claim a marital deduction, which allows them to transfer an unlimited amount of assets to their partner without paying any taxes.
Gift Tax Exclusion
The gift tax exclusion is another tax benefit of marriage. This exclusion allows married couples to give each other up to $15,000 per year without triggering a gift tax. This is a valuable tool for couples who want to transfer assets between them without paying any taxes.
Tax-Free Retirement Benefits
Finally, married couples are able to take advantage of tax-free retirement benefits. This includes the ability to roll over a retirement account from one spouse to another without triggering any taxes. Additionally, married couples may also be able to use a spousal IRA, which allows a non-working spouse to contribute to an IRA and take advantage of the same tax benefits as their partner.
Conclusion
As you can see, there are a number of tax benefits of marriage that couples can take advantage of in 2023. From filing status changes to estate planning benefits, marriage can be a great way to save money on your taxes. However, it is important to remember that the tax laws are constantly changing. So, it is always a good idea to consult with a tax professional before making any major decisions.