How a change of marital status affects your taxes

How does your marital status affect filing status?

Marital status and filing status are two different things. Your marital status—single, married, separated, divorced, or widowed—is an official relationship status recognized by your local government. While related to marital status, your filing status is how you tell the IRS which tax rate schedule/table you are eligible for so you can pay the right amount of taxes. 

For example, say you get married. Your marital status and your filing status both change. You now have a choice of two filing statuses - “married filing jointly,” or “married filing separately.”   

Once you are officially married in your state, you must change your filing status on your next tax return. Be sure to update your filing status on your W-4 so you set aside the right amount to pay your taxes. 

When you file your taxes, only consider your marital status on the last day of the tax year. The tax year generally runs from January 1 through December 31. Even if you only officially got married (or divorced) on December 31, use your marital status at the end of that day to determine your filing status. 

Did you get married?

If you got married this year, congratulations! In terms of taxes, marriage could mean big changes.

With your marriage, your filing status changes. As mentioned earlier, you now have the option of either filing jointly with your spouse or filing separately. Each of these filing statuses comes with its own advantages.

Filing a joint return combines both your incomes, deductions, and credits into a single tax return. The threshold for many taxes and deductions is higher on a joint return, meaning you two can earn more together before you must pay more.

Filing separately could work in your favor, depending on your tax situation, like if you have many out-of-pocket medical expenses to claim. On the other hand, filing separately might disqualify you from certain tax deductions and credits, such as:

• Student loan interest – Allows a deduction for up to $2,500 of qualified student loan interest paid.
• Education credits – Two credits, American Opportunity Tax Credit and Lifetime Learning Tax Credit, available to eligible students or dependent students how took part-time or full-time college, university, or trade school courses during the tax year.
• Earned Income Tax Credit (EITC) – A credit for taxpayers whose earned income is low.
• Premium Tax Credit – The reconciliation of the advance payment of the tax credit used to lower the cost of health insurance.
• Child and Dependent Care Expenses – The credit for some of the eligible expenses paid for daycare for either a qualified child or other dependent while you work.

Not sure which way to go? Ask your Tax Pro.

Marriage annulment

If you had your marriage annulled, you may need to amend your tax returns. For any years that you filed taxes during the marriage, you are now considered to have been unmarried. Make sure your filing status on your tax returns reflects this updated marital status.

Did you get a divorce? 

Getting divorced impacts your filing status for a given tax year. Once you are divorced, you lose both options to file as married until you remarry. If you remarry in the same year as your divorce, you may file as married with your new spouse.

If you and your partner split up or separate—but you’re not divorced or legally separated according to your state’s law—by the end of the year your filing status does not change. Your status is still “married,” and you and your spouse still have the choice to file as "married filing jointly," or "married filing separately." 

Tip: A joint return may allow a refund vs a balance due or a larger refund but it makes both taxpayer’s liable for any issues with the tax return. A separate return doesn’t allow certain credits and has a higher overall tax rate but only the taxpayer on the return is liable for any issues. 

Choosing the right filing status can make a huge difference in the types of credits and deductions available to you. Watch the video below to hear what our Chief Tax Information Officer, Mark Steber, has to say about filing your taxes after a marital status change.