First of all, don’t let financial matters be more important than your personal relationships. But if you are planning to get married, it might save some taxes for you to consider some of the following items.
In 2014, two unmarried individuals can each have $89,350 of taxable income (after the standard deduction or Itemized Deductions and personal exemption) before they are taxed at 28 percent. But if they are married, their combined taxable income over $148,850 will be taxed at a rate starting at 28 percent (for taxable income above that).
Congress has decided there is a marriage penalty when the married taxpayers’ combined income will cause part of their income to be taxed at a rate above 25 percent, even though if they were single, none of their income would be taxed above 25 percent.
The marital status for the entire year is determined as of Dec. 31. If you get married (or divorced) on or before Dec. 31, for taxes it is as if you were married (or single) all year long.
If the marriage is set for 2015, it might save taxes to accelerate income into the year 2014. For example, sell that stock that has a profit (gain). Take that taxable IRA distribution (assuming you avoid the 10 percent early distribution penalty for not being age 59 1/2). Try to have the bonus wages at work paid in December instead of in 2015.
In some situations, it might be the reverse planning is best for deductions, deductible expenses, etc.
Some individuals are getting the page 1 of form 1040 deduction for up to $2,500 of interest on qualified education loans. But that deduction is reduced based on Adjusted Gross Income (AGI). No deduction for that item is allowed if the joint return has AGI of $160,000 or more and no deduction for single folks with AGI about $80,000.
The 3.8 percent net investment income surcharge applies for those with investment income (interest, dividends, capital gains, rents, etc) above a Modified Adjusted Gross Income. The threshold amounts are $250,000 for joint returns and $125,000 for single folks. Basically, only the investment income above those threshold amounts is subject to the 3.8 percent extra tax (or surcharge).
If there are minor children involved, then maybe one or both of you might benefit from the Head of Household tax rates and rules.
The idea is to not be surprised. Look at last years returns and 2014 expected amounts. Do some draft 2014 and 2015 returns to see if you will benefit from moving the marriage date from next year to this year (or the other way).
Did you hear? “Harmony is pure love, for love is complete agreement.” — Lope De Vega.
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.