The often-overlooked rule is that your marital status as of December 31 usually determines your filing status for the entire year. Get married one minute before Auld Lang Syne , and the IRS considers you to have been married for the previous 12 months of that year. And that can be expensive. Consider, for example, Jane and Bill. The problem is our old friend bracket-creep.
Higher income means a higher tax rate.
When he marries Jane, however, his income is combined with hers. If you're maritally minded, there's no way to avoid it unless you're willing to postpone the wedding to a future year. The catch is that the right set of numbers transforms this penalty into a bonus. Suppose, for example, that you've made a killing in the market and are staring at a heap of taxable capital gains. If your intended, on the other hand, invested a bundle in Frogs R Us and is sitting on a pile of capital losses, getting spliced will allow your new spouse's losses to offset your gains, substantially reducing your combined tax bite, should you choose to realize the gains.