By Shane R. Fisher, CPA

One of the last things a couple considers when planning a wedding is what their income tax returns will look like when they file the next year. Given the changes under the Tax Cuts and Jobs Act of 2017 (TCJA), it may be more important than ever to discuss the tax results or schedule a premarital meeting with a tax professional. There have been several law changes that couples need to prepare for that may affect newlyweds’ income tax liability in 2018.

Here are a few facts couples need to know:

• Tax rates for married filing jointly benefited significantly. Be aware that the dreaded marriage tax penalty still exists, but it may not come into effect until joint incomes reach $400,000. The marriage tax penalty is the point at which income tax brackets on a specific taxable joint income diverge if you are single versus married. For example, in prior years if you and your spouse jointly earned more than $75,900, then you would have owed more in taxes as married filing jointly than if you each were still single. Under the TCJA, the income tax brackets between single and married filing jointly do not diverge until $400,000 for 2018-2025.
• The standard deduction nearly doubles. The standard deduction for married filing jointly was $12,700 in 2017 ($6,350 single); it is now $24,000 for married filing jointly at the end of 2018 ($12,000 for single). However, personal exemptions have been eliminated ($4,050 per exemption). In other words, if you have no children and were married in 2017, your standard deduction and personal exemptions totaled $20,800. In the same situation for 2018, you will receive an additional $3,200 in deductions to offset your taxable income.
• State and local tax deductions (SALT) are now limited to a total of $10,000, regardless if you are single or married. SALT includes any state and local income taxes, real and personal property taxes, or state sales taxes. For those with significant income or property with high property taxes, your income tax liability may be affected significantly.
• The child tax credit doubles from $1,000 to $2,000. If you owe zero tax, the refundable amount is $1,400 for 2018. In addition, there is a $500 credit for each non-child dependent. The threshold for the phaseout for these exemptions were raised from $110,000 married filing jointly in 2017 ($55,000 single) to $400,000 for married filing jointly in 2018 ($200,000 single).

Start your marriage off right and avoid potential pitfalls by reviewing your new income tax situation with your tax professional, or visit PICPA’s CPA Locator to identify a CPA near you. 

Shane R. Fisher, CPA, is a manager at Boyer & Ritter LLC. He provides audit, accounting, and tax services to small business and nonprofits and personal income tax services. He is a member of PICPA’s CPA Image Enhancement Committee.