Few events in life have greater tax consequences than changing your marital status. If you file jointly, you're affected by your spouse's income, deductions, and other tax items. If you file separately, you generally cannot take tax credits, such as the child and dependent care credit, and you can't claim the standard deduction unless your spouse does the same. If you live in a community property state, you may have to claim some of your spouse's income and deductions, even when you file separately.
You may have heard of the "marriage tax" or the "marriage penalty." There is no specific tax for married people. The so-called marriage penalty is the higher total tax some taxpayers may pay due to provisions in the tax code.
For example, you can use $3,000 of capital losses to offset ordinary income, such as wages, every year. A single person can deduct up to $3,000 against ordinary income and a married couple together can only deduct up to $3,000 against ordinary income. If the married couple files separately, they can each only deduct $1,500 of capital loss against ordinary income.
Most limits and phase-out ranges are higher for a married couple than for a single person, but they may be less than two times the amounts for a single person. For example, a single person can make up to $200,000 before the Medicare surtax is applied, but the limit for a married couple is $250,000.
If you are married and living with your spouse, you must file as married filing jointly or married filing separately. You cannot choose to file as single or head of household. However, if you were separated from your spouse before December 31, 2020 by a separate maintenance decree, you may choose to file as single.
You may be able to file as a head of household instead of as married if you meet certain qualifications to be considered unmarried. You must be a U.S. citizen or resident the entire year, not file with your spouse, pay more than half the cost of keeping up your home during the year, and have your child in your home for more than half of the year. The child must be your dependent, or a child who would have been your dependent except that you released the dependency to the other parent. In addition, your spouse must not have lived in the home during the last six months of the year.
When you get married, it's a good time to check your income tax withholding and make sure you're not having too much - or too little - withheld from your paycheck. It is important to file a new Form W-4, with the Married checkbox selected, with your employer after your marriage. When you do, it may be equally important to adjust the amount of withholding on the Form W-4. For example, if you and your spouse make similar incomes, you may need to have more income tax withheld to avoid a potential tax bill next year.
On the other hand, if your spouse has little or no income, your income tax bill when you file jointly may be considerably less. You may need to have less income tax withheld to avoid having the IRS hold too much of your money all year.
One way to fill out your Form W-4 is to estimate your tax liability as closely as possible for the current year, and then have an amount as close to your liability as possible withheld throughout the year. If something changes during the year; for example, if you quit a job or buy a house, you can estimate your tax liability again and make any necessary adjustments.