#MIDDLEBURY #INCOMETAX
by Mark A. Burns
Five different filing statuses are available when you file your income tax returns: Single, Married Filing Joint, Married Filing Separate, Head of Household and Qualifying Widow(er). Most people are familiar with the first two, but may be less familiar with the others.
I was recently asked by a client of mine who is soon to get married what effect the wedding would have on their combined tax situation. Since her future husband is not a current client of mine and I am not privy to his personal tax situation, the general answer I gave is that it depends on the relative income levels (and tax deductions) of the two spouses.
If they have similar levels of income, then very often they will end up paying higher combined taxes after marriage since some of their combined income will now be pushed into a higher tax bracket – the so called “marriage penalty.” This penalty has been lessened over the years but still exists to some degree. However, if they have different income levels, then getting married may result in lower taxes since the higher-income spouse may have more income spread out over a lower tax bracket. The only way to know for sure is to run the numbers and see what happens.
Now once someone is married, they often think that Married Filing Separate is the same as Single. It is not. Often, a married couple filing separate will pay more combined taxes than filing joint, but this is not always the case, and again the only way to know for sure is to run the numbers both ways. Also, some tax benefits are not allowed at all to either spouse if they file separately, e.g., neither spouse is then eligible to put money into a Roth IRA, and neither spouse can get any tax benefits for college tuition.
Head of Household – To qualify for this filing status (which is more favorable than Single for tax purposes), you must be unmarried (or living separately from your spouse for at least six months) and must have incurred more than one-half the cost of maintaining a home for another person, most commonly a child who is your dependent for tax purposes, but other people also may qualify.
Qualified Widow(er) – This filing status applies when a married person loses a spouse and has a child living with them. The qualified widow(er) tax brackets are the same as married filing joint and so effectively allow the surviving spouse to continue to get the tax benefit of filing joint for the year their spouse passed away as well as the two subsequent years.
The above is a very general overview of what can be a very complicated subject. Each person’s tax situation can be unique. Always consult a tax professional if you are uncertain how tax matters might affect you.
READERS: Do you have a tax topic you would like Mark Burns to discuss in this column? If so, please send your column idea to Mark@DFSPC.biz.
Mark A. Burns, M.B.A., is a C.P.A. with Diversified Financial Solutions PC in Southbury. He can be reached at 203-264-3131 or Mark@DFSPC.biz.
