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Tax tips for married couples

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When your clients sit down to work on their 2022 income tax returns, they’re likely going to notice some changes. That’s because many of the federal tax breaks enacted for the 2021 tax year expired on December 31, 2021. From wider tax brackets to the child tax credit and other common tax breaks, there are some notable differences for the 2022 tax year. Whether your married clients have been together for decades or are just home from their honeymoon, it’s important for them to understand how changes in the tax laws will affect them.

Revised tax brackets

For married couples filing jointly, as well as individuals and heads of household, federal income tax brackets are a bit broader. That’s because these figures are based on inflation, which was higher, between September 2020 and August 2021. Here’s how tax brackets are structured for married couples filing jointly in 2021 and 2022. Since revisions for the 2022 tax year cover a wider taxable income range more mid-range wage earners are captured, which may shift some households to a different tax bracket — potentially a lower one.

Tax rate 2021 taxable income 2022 taxable income
12 percent $20,551 – $83,550 $22,001 – $89,450
22 percent $83,550 – $178,150 $89,451 – $190,750
24 percent $178,151 – $340,100 $190,751 – $364,200

Avoiding a "marriage tax penalty"
Couples who file jointly may still be penalized by what’s often known as the “marriage penalty.” One unintended outcome of the country’s income tax system is that reporting a combined income for a married couple may result in a higher tax liability than if those same two people had remained single and filed individual income tax returns. However, the new tax brackets will also make an impact there.

  • Equal salaries: Generally, if both partners fall into the same tax bracket and file a joint return, they won’t find themselves in a higher tax bracket. However, earners in the top income bracket starting at $693,751 per year may be “penalized” if they file a joint return.
    • Let’s consider a married couple, Johnathan and Rebecca who each earn $95,000 a year. Looking at the newest federal income tax brackets, they would be taxed at 22 percent, which maxes out at $95,375 for individuals and exactly doubles at $190,750 for married couples filing jointly. If they file jointly with their combined annual income of $190,000, they are each being taxed at 22 percent as well.
  • Unequal salaries: If partners earn salaries that place them in different tax brackets and they file a joint income tax return, the lower earner could potentially be bumped up into a higher tax bracket.
    • For example, what if Rebecca gets a raise or a bonus and now earns more? If she now earns $100,000 and Johnathan’s salary stays at $95,000, their new combined income of $195,000 surpasses the $190,750 ceiling for the 22 percent income tax bracket. In this example, filing jointly means they will be both bumped into the next bracket, being taxed at 24 percent even though Johnathan’s individual income still falls in the lower bracket.

Tax implications for older married couples
There are other factors that can affect married couples when they file their federal income taxes, including the additional standard deduction for people aged 65 and older. Each spouse can claim an additional 2022 standard deduction of $1,400 ($1,750 if using the single or head of household filing status) if they are at least 65 years old or blind.

There are clear benefits and drawbacks for filing as a married couple, a head of household or as an individual. When children and mortgage payments come into play, the details can get more complicated. Encourage your clients to talk with a tax professional about changes in the tax code, as well as how combining incomes could affect their tax situation.

Other tax adjustments to consider

  • Standard deductions: With the most recent set of changes to the tax code, standard deductions rose by $800 to $25,900 for married couples filing jointly. And for older married couples, there is still an additional $1,400 available for each spouse aged 65 or over.
  • Child tax credits: There have been significant changes to these credits since the enhancements in 2021 expired at the end of that year. For the 2022 tax year, the maximum credit percentage falls to 35 percent, and it is only allowed for up to $3,000 in expenses for one child/dependent or $6,000 for more than one. Applying this new percentage, the maximum tax credit is $1,050 for one child/ dependent or $2,100 for more than one. However, families who adopted a child in 2022 will be able to claim an increased adoption expense credit of $14,890.
  • Additional dependents: A new credit up to $500 may be available for each dependent who doesn’t qualify for the child tax credit in the 2022 tax year.
  • Health savings account (HSA): The contribution limits for families rose to $7,300 for 2022, and if you’re 55 or over, there is a $1,000 “catch-up” contribution available.
  • Selling a home: Married homeowners with a plan to sell can exclude up to $500,000 from the capital gains tax if they satisfy the requirements, whereas a single filer selling a home can only exclude up to $250,000.

With inflation hovering at 40-year highs, President Biden signed the Inflation Reduction Act of 2022 to enact new legislation that should address some of the pressing financial concerns in the United States. Although the exact details are still unknown, the intent is to better level the playing field with higher taxes for some corporations and no tax raises for small businesses or middle-income families. Other ways the legislation may impact some married couples involves health care premiums, clean energy and electric vehicles. Watch in the coming months for more information that could help some of your married clients save money on their taxes.

With some tax changes expiring at the end of 2022, revised tax brackets and other changes on the horizon, some clients may be eager to discuss potential financial impacts. As well as encouraging the married couples and individuals you work with to seek out the best tax advice, being aware of the upcoming tax changes can help prepare you for those conversations.

Two things you can do today

  1. Review the adjustments posted by the IRS planned for the next tax year.
  2. Make a list of your clients whose finances may be impacted by upcoming changes, and reach out to them to discuss their overall financial picture.  

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