When it comes to taxes, is marriage a penalty or a bonus? That's a tough one. If a married couple pays more in income tax when filing jointly than they would've paid as two single people, that's called the marriage penalty. Despite legislation to eradicate the marriage penalty, there are still marriage traps lurking in the tax code. For 3475&po=6456&aff_sub5=SF_006OG000004lmDN example, if both spouses work, any income over $139,350 is taxed at a 28 percent rate. If that same couple was still single, they could each earn up to $83,600 (for a total of $167,200) and still remain in the 25 percent tax bracket. That's a pretty wide gap. That's called a marriage bonus. The marriage bonus is largest when one spouse makes a lot more money than the other, 3475&po=6456&aff_sub5=SF_006OG000004lmDN but there are other situations -- like estate transfers or selling a home -- in which your marriage status can save you serious bucks on tax day. Thank heavens for the standard deduction!
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In a rare flash of generosity, the Internal Revenue Service (IRS) gives all taxpayers a sizable automatic deduction from their taxable income. For single taxpayers in 2013, the standard deduction is $6,100. But for married couples filing jointly, the deduction is exactly twice as much: $12,200. When you add in the personal and dependent exemptions you have some serious tax savings. The standard deduction used to be one of the greatest causes of the marriage penalty. While it didn't significantly contribute to the divorce rate, it was widely viewed as unfair. Now married couples can collect their full share of free deductions. Just don't rub it in to your single friends. You don't have to be married to have children, but according to the Census Bureau, married couples make up the vast majority of American households with children. The moral of the stats story is this: You're more likely to have kids if you're married. And the best part of having kids is that they're tax gold!
Every member of your family gets a free personal exemption of $3,900 in 2013, even a newborn infant. Then there's the Child Tax Credit. If you don't make a lot of money and have three or more kids, you might even qualify for an additional child credit. The next tax benefit of marriage is for folks who are "unlucky" enough to die rich. First, a caveat. The federal estate tax (a.k.a. The tax is levied on the transfer of large and valuable estates to children and other heirs. If you die with assets valued at less than the $5.25 million mark, then the feds don't even make you file an estate tax return. But if you find yourself in the enviable/unenviable situation of dying with a sizable nest egg, it pays to be married. The IRS calls this the marital deduction. While you're living, you can only give away a certain amount of money each year to each member of your family -- $14,000 since 2013. This is the IRS's way of stopping rich uncle Morty from evading estate taxes by giving away all of his cash before he dies.
But gifts for spouses are completely exempt from the gift tax. That would explain Aunt Edna's jewelry collection. For our next item, we'll look at the tax benefits of marriage when it comes to saving for retirement. Individual Retirement Accounts (IRAs) are good stuff. With an IRA, you can make tax-deductible contributions to a retirement savings account. That means you can put money away in your IRA account -- up to $5,500 a year for most taxpayers -- before taxes. The trick with an IRA is that it's an "individual" retirement account. Under normal circumstances, you can only deduct contributions that you make to your own IRA, not someone else's. But here's where married couples get sex a break. If you meet certain conditions, you can pay money into your spouse's IRA and deduct up to $11,000 on your joint tax return. First, let's look at those "conditions." If you and get sex your spouse's total AGI is more than $178,000, you can't deduct the full $11,000.
Also, there's the matter of other retirement plans. The feds figure that if you have a second retirement plan, you don't need so many deductions. And there's even better news if you or your spouse are 50 years or older. For our final tax benefit of marriage, we attempt to dodge the bullet of the capital gains tax. Buying a home is a usually a smart investment, unless the Internal Revenue Service (IRS) treats it like an investment. If the IRS decides that you bought a property as a short-term investment -- to "flip" it for a profit, in other words -- then it will charge a 20 percent capital gains tax on any profit you make from the sale. The best way to protect yourself from capital gains tax on the sale of a home is to qualify the home as a long-term investment. The IRS uses two tests to determine if your home qualifies as a long-term investment: time and residency.