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Tax tips for married couples

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When your clients sit down to work on their 2023 income tax returns, they’re likely going to notice a few changes. From wider tax brackets and a significant increase in the standard deduction to the child tax credit and other common tax breaks, there are some notable differences for the 2023 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, federal income tax brackets have shifted since these figures are based on inflation. Here’s how tax brackets are structured for married couples filing jointly in 2022 and 2023. Since revisions for the 2023 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 2022 taxable income 2023 taxable income
12 percent $20,551 to $83,550 $22,001 to $89,450
22 percent $83,551 to $178,150 $89,451 to $190,750
24 percent $178,151 to $340,100 $190,751 to $364,200
32 percent $340,101 to $431,900 $364,201 to $462,500
35 percent $431,901 to $647,850 $462,501 to $693,750
37 percent $647,851 or more $693,751 or more

Avoiding a "marriage 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 Johnathan and Rebecca, a married couple who each earn $95,000 a year. Looking at the 2023 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 both be 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 2023 standard deduction of $1,500 ($1,850 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. 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: Standard deductions rose by 7 percent to $27,700 for married couples filing jointly, the largest automatic inflation adjustment in history. And for older married couples, there is still an additional $1,500 available for each spouse aged 65 or over.
  • Child tax credits: For the 2023 tax year, the maximum credit percentage has decreased from 2022, and is allowed for up to $2,000 in expenses per qualifying child. However, families who adopted a child in 2023 will be able to claim an increased adoption expense credit of $15,950.
  • 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 2023 tax year.
  • Health savings account (HSA): The contribution limits for families rose to $7,750 for 2023, 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.
  • Energy efficient home improvements: For homeowners who made qualified energy-efficient improvements to their home after Jan. 1, 2023, they may qualify for a tax credit up to $3,200.
  • Electric vehicle: The electric vehicle (EV) tax credit is new in 2023 and provides a tax credit up to $7,500 for people who purchase a new electric vehicle, or up to $4,000 for a used electric vehicle.

Since many tax credits were reduced or expired at the end of 2022, you may have clients voicing their concerns over receiving a potentially smaller tax refund this year. However, the IRS did announce annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules, that may deliver certain tax perks and prevent couples from creeping into a higher tax bracket even if their income increased.

With these tax changes and revised tax brackets, some clients may be eager to discuss potential financial impacts. As well as encouraging the married couples 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.

Any information regarding taxation contained herein is based on our understanding of current tax law, which is subject to change and differing interpretations. This information should not be relied on as tax, legal or financial advice and cannot be used by any taxpayer for the purposes of avoiding penalties under the Internal Revenue Code. We recommend that taxpayers consult with their professional tax and legal advisors for applicability to their personal circumstances.


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