It Might Mean a Lower Tax Bracket
If your partner has a lower income than you, filing jointly could mean that your combined income drops you down a tax bracket, saving you money. If you make $50,000 and your spouse earns $20,000, your individual tax liability when filing jointly is the average of the two, or $30,000 each. Depending on the difference between your income and theirs, that might mean big savings for you as a couple.
You May Be Able to Take More Deductions
When you’re filing jointly, it’s often possible to take advantage of more deductions than you can when you file as single. If one spouse has unused deductions that the other can take advantage of, they can now reduce their combined tax liability together. This applies to all sorts of deductions, including charitable ones. And if one partner has a number of health concerns and the other doesn’t, for example, you can meet that combined medical deduction with expenses shared between the two of you.
More Tax Credits Can Help You Save
With tax breaks like the childcare credit and two higher education credits, filing jointly can mean big savings when tax time comes around. You can also look into the premium tax credit for health insurance if that applies to your situation.
You Can Get an IRA Even Without a Salary
If you don’t have an income from a job as a single person, you aren’t able to have an IRA for retirement. But if you’re married and your spouse has an income, you can save for retirement in your own right. This lets you increase your overall savings, potentially making it to retirement earlier. And you might be able to take advantage of deferred taxes, too.
You Can Delay Estate Tax Concerns
Under federal law, assets transferred over to a spouse after the other partner’s death are exempt from estate taxes. Whereas if they’re willed directly to children or other relatives, those taxes apply. That can be a big boon for folks who would be negatively impacted by federal estate taxes—ones with an estate of over $12,006,000. That might not be a factor on this year’s return, but it’s something to keep in mind for the future.
As you build toward your financial future, RMCU can help you along the way with savings advice and lifestyle tips to get you to the next steps. Whether you’re ready to buy a home or save for retirement, RMCU can help you get there.
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