- Tax penalties. Marriage causes many tax regulations to take effect retroactively; that is, if you are married as of December 31, some rules apply as if you were married for the entire year. For instance, the total annual wages of both spouses are combined on a joint return regardless of when the wedding took place. Because two wage-earners filing jointly will often pay more tax than if they filed as singles, this can cause a tax problem that needs to be addressed. You may need to increase your withholding or estimated tax payments, or you could face penalty and interest charges on underpaid taxes.
- Tax benefits. But marriage also has its tax advantages. A wage-earning spouse can make an additional $5,500 IRA contribution for an unemployed spouse.
Estate taxes can be lightened by marriage, with a doubling of the exemption amount. Also, married taxpayers can jointly make tax-free gifts of up to $28,000 per year, double the amount a single taxpayer can make.
Wedding bells may be ringing soon, but before you walk down the aisle, consider an analysis of the tax and financial issues in marriage. It may just be the most important item in your wedding plans.