How will getting married affect my taxes
How will getting married affect my taxes?
For the average healthcare traveling couple, the answer is "possibly badly." However, recent tax code changes to presumably eliminate the "marriage penalty" have provided some limited, temporary relief.
Even if you get married on the last day of the year, for tax purposes, you are considered married for the entire year. Without children, you have only two possible filing statuses—"Married Filing Joint" (MFJ) or "Married Filing Separate" (MFS). You can no longer legally file as "Single" and you are not "Head of Household" unless you have a child.
What is the marriage penalty? The marriage penalty is a holdover from an earlier era when single income families were the norm. This penalty occurs when a married couple filing jointly pays more tax than if they filed two single tax returns with the same incomes. It doesn't affect all couples equally. Since tax code was written to tax household—rather than individual—income, couples with similar earnings see a larger penalty than those with disparate ones. The penalty manifests in two ways: the MFJ standard deduction is less than twice the single standard deduction; and MFJ tax brackets that transition to the next higher bracket at less than twice the single
Temporary relief. Much confusion exists over the marriage penalty. In 2001, Congress passed legislation to phase-out the standard deduction and tax bracket penalties between 2005 and 2008; but the change "sunsets" in 2010, reverting to pre-2001 law. Bowing to White House pressure in 2003, Congress implemented full elimination of the penalties for 2003 and 2004 only—reverting to the original phase-out beginning in 2005. Under current 2005 provisions, the MFJ standard deduction will drop from the 2003/2004 200% down to 180% of the deduction for single filers—beginning the phase-in of the penalty phase-out.
By and large, it's more advantageous to file jointly, but if MFS does happen to save you taxes, you may file that way. Most individual and professional computer tax programs have "what-if" functions for comparison. The major reason for filing separately would be some prior liability for one of you, such as taxes, child support, or alimony.
The preceding discussion is general in nature, and should not be considered advice for any individual tax situation. You should consult with your personal tax planning professional for specific guidance relating to your unique circumstances.
Dan Kobaly, EA, a tax advisor and enrolled agent, is owner of www.kobaly.com based in Yucca Valley, California.Source: healthcaretraveler.modernmedicine.com