Love is a many-splendored thing, but love is even better when it saves taxes. Your marital status at year-end is your filing status for the entire year, so maybe you want to run down to the courthouse and tie the knot before the ball drops before midnight January 1, local time. Sure, call me a hopeless romantic. The Tax Update just rolls that way.
A quick trip to the preacher may be in order in the following circumstances:
- One prospective spouse has a big capital gain, and the other has capital losses that would otherwise go unused.
- One of you has passive income, the other has passive losses. If you are married on the last day of the year, the losses can offset the income on a joint return.
- One of you has substantial income in 2009, and the other doesn't. If you have only one income between the two of you, you'll save taxes on a joint return because of the wider tax brackets on a joint filing.
- If you are Iowans, and one of you has pension income, marriage will enable you to exclude up to $12,000 from your Iowa income tax return. A single filer can only exclude $6,000.
There are a wide variety of other special circumstances that could lead you to tie the knot. A good tax marriage results whenever one partner has tax attributes, like capital losses, that can be used on a joint return but would not be useful on a single return. Other such items could include tax credit carryforwards and investment interest carryforwards, among others
Of course these things apply to couples pondering divorce, too, but that's too sad to dwell on this time of year. Oops, I just did. And some couples, particularly those where both have good incomes, are better off postponing marriage, or (shudder) accelerating divorce.
Anyway, you should marry for the right reasons. But if you can both be in love and cut your taxes, why not let IRS help pay for your honeymoon?
This may be the most romantic of our 2009 year-end planning tips. But we're not done yet!
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to