Preparing for Your First Joint Tax Return

So for those of you who missed the memo, I’m married now. While I can hear the hearts of single women around the world breaking as these words are read, I have something else churning in my mind. I have to change how I file my taxes. This whole married money thing has been going well so far, but I’ve never thought about joint taxes before getting married, and I’ve learned a ton about the implications of tying the knot.

What Changes?

Wow. You’re married. What changes? Pretty much everything. Your income, debt, and other financial decisions are all tied to another person, and their finances connect to you. That is a pretty massive lifestyle change for someone used to single person finances.

While you have been busy mingling your checking, savings, credit cards, and expenses, the government has quietly been waiting to give you another big change: how you file your taxes.

When you have filed in the past, you have generally checked the box that you were a single person filing individually. Now, you get to choose between “married filing jointly” and “married filing separately.” You make that decision when filing your IRS Form 1040, the main tax form every adult American files each year.

When filing separately, any W-2 from your job, 1099 from other income, and any other income that you earned yourself was added up on your own tax return each April. Now that you’re married, you can lump all of your income together and only have to file one return. That is about half the work, right? So it’s always a good idea, right? Well, it’s not so simple.

Income, Deductions, Exemptions, and Credits

J & E
My partner in life and taxes

When you filed alone, everything was probably fairly straight forward. You took your total income, subtracted deductions and credits, tacked on a schedule C if you have a small business, and you are good to go.

Now that you’re married, you add up all of that for two people. But like in most things taxes, the numbers don’t always work out as simply as 1+1=2.

On the income section of your taxes, 1+1 actually does equal 2. You can just add everything up in the income section on your 1040 and combine your income with your spouse.

What changes is how your adjusted gross income (AGI), deductions, and credits come into play. When you are single, you can either choose a standard deduction of about $6,100 (for 2013) or itemize your deductions to see if your deductible expenses are more than the standard deduction, which allows you to save more on your taxes.

In the past, I have used the standard deduction every year other than 2013, when I was able to itemize my deductions thanks to mortgage interest and a handful of other deductible expenses. Any deduction I had over $6,100 in 2013 lowered my taxes.

When you file jointly, your standard deduction doubles. Now you automatically deduct $12,200 (in 2013) off of your income. Suddenly that mortgage interest of $7,000 is not pushing you over the standard deduction limit anymore. However, you get the joint benefit of $6,100 each, so your taxes will go down in total thanks to being married.

That is just one example, and it is pretty common. In general, filing jointly is the best option. When you file jointly you also get extra access to things like student loan interest, tuition, and fees deductions, the earned income tax credit, lifetime learning credit, and child and dependent care credit.

The “Marriage Penalty”

With all of those benefits, you might be wondering the drawbacks of filing jointly. There are a couple of possible scenarios when filing jointly is bad and your tax bill will go up from a joint tax return.

One common situation is when one spouse has a large out-of-pocket medical expense. Medical expenses are only deductible from your taxes if they exceed 10% of your AGI. Your joint income might put that medical expense below 10%, but filing jointly would allow that deduction.

Another situation is commonly called “the marriage penalty.” In the event that both spouses have very similar income levels and the stars align just right, your taxes will actually go up by filing jointly. If your combined incomes bump you up into a tax bracket and your total combed taxes are higher than they would be individually.

However, in most situations the combined standard deduction would easily make up the difference. In a situation where one spouse makes significantly more than the other, you get a “marriage bonus” where your taxes go down thanks to married status.

This article from US News by my friend Jim Wang runs the numbers and explains which brackets, all higher income brackets, may lead to a marriage penalty. If you want to get into the weeds, you can try this tax calculator to see how your situation is impacted and how you should file.

In my situation, we definitely get a marriage bonus this year, so I know we will be filing our first joint tax return for the 2014 income year.

My Filing Plan for Next Year

My first tax return was pretty simple. I was 15 and was paid a few bucks by my parent’s business for work I did for them. That year, my family’s accountant did my taxes for free, and continued doing them for $50 per year until I graduated from college.

As I’ve aged and my side income as grown, my taxes have become more complicated and more expensive to prepare. I’ve written about earning more on the side and turning a hobby into income lots of times on this site. I’ve also written about how side income is reported for taxes and whether it is worthwhile to create an LLC or other legal entity for your side business income.

In my situation, I have 2 LLCs and have filed 3 schedule C forms with my taxes for the last few years. That has driven up my cost of hiring an accountant significantly. Last year, I paid my accountant over $500, and I decided it is time to try it myself.

I am going to try H&R Block this year for my taxes. Their program looks like it is going to be a little cheaper and a little better for what I need compared to an accountant. If you are deciding on an accountant or online tax prep, here is a post to help you decide what is best for you.

For me, I am going to DIY. And you know you can come back early next year and I’ll tell you how it goes.

Your Stories?

Have you changed from single to married tax filing in the past? How did it go? Did you hit any unexpected challenges transitioning?

Do you have any tax questions for me? Please let me know in the comments. I read every single one.

2 thoughts on “Preparing for Your First Joint Tax Return”

  1. My husband and I have very similar income, but are in a low enough tax bracket that the marriage penalty doesn’t apply to us. I’ll be pretty mad if it ever does, though! It doesn’t seem right to hand out bonuses or penalties based on marital status.

    1. It is a crazy thing to think that the government would charge people more to be married depending on their income levels. I like when all people are treated equal.

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