So you’re thinking about getting married? That’s great, because marriage actually comes with a lot more benefits than the love and companionship that it can provide. At tax season, being able to file jointly will likely help your tax situation in a big way!
In this article, we are going to look at a couple of the things that couples should be doing with their tax returns to save the most money each year.
1. File Jointly!
This cannot be overstated enough! There are a myriad of benefits that are associated with filing your tax returns jointly instead of individually. Besides the time that it saves you both, you will find that you get far greater deductions and credits than what is standard for people who file individually.
2. Maximize IRA Contributions
When you were filing as an individual, you could only contribute $5,500 to your traditional IRA and take an $830 deduction for the 2016 tax year. However, if you get married and your spouse chooses not to work, which means that he or she can’t participate in an employer-sponsored retirement plan, then you can deduct up to the full contribution limit for each of your IRA contributions.*
This means that you could report up to $11,000 in traditional IRA contributions for the 2017 tax year, which would greatly increase your tax deduction. Of course, you would have to be able to contribute this full amount to take advantage of this scenario.
*The caveat: you must make less than or equal to $184,000.
3. Use Your Spouse’s Business as a Tax Shelter
Now, no one gets married for the tax benefits involved. However, it is possible that one spouse could serve as a sort of tax shelter for the other for a couple of years if the one had a business that was failing.
Since these losses can be carried over for a few years until they are all fully accounted for, a couple filing jointly could use these losses as tax write-offs for quite some time.
4. Estate Protection
Under current tax laws, when one spouse dies and leave his or her estate to the other, no tax bill is created. In fact, the tax bill will be held off until the remaining spouse dies, eliminating the final person with full legal right to the estate.
This can help a family’s funds to continue to grow uninhibited for as long as at least one spouse remains alive, which can eventually translate to a greater inheritance for any remaining children or grandchildren that you may have.
David Milberg is a financial analyst from New York City.