Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

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Pioneer
Posts: 1
Registered: ‎09-11-2017

Getting Married and Child Tax Credit/HOH

Hello All!

 

I am engaged and wondering about the tax implications of getting married to my longtime fiancee.

 

I am divorced and have three dependents. I file as Head of Household and I typically receive the full child tax credit for each child, in addition to some dependent care credit. I expect my AGI to be approximately $28k-$30k this year.

 

My fiancee is an independent contractor and is self-employed. He expects his AGI to be approximately $35k this year. He files single and has no dependents. This is the first year he's been self-employed and so I am unsure what kind of tax implications that will have for him and what he can claim/write-off/be penalized for.

 

My understanding is that if we were to be married, I cannot file as HOH so I would lose the tax benefits from that. I am assuming I can still claim my dependents, although they are "my" children and he would be their stepfather, so technically not his dependents according to tax filing. With the combination of incomes, I am also assuming that we would receive very little, if any, tax refund.

 

I would love to get married, but it does not seem like a very sound financial decision as I believe we'd lose the tax benefits of being able to file HOH. Is there anyone out there with any advice in this case, or maybe has been through a similar situation?

Tax Pro
Posts: 5,723
Registered: ‎02-23-2016

Re: Getting Married and Child Tax Credit/HOH

Hi stephaniemarie,

 

 

Welcome to the H&R Block community.

 

There is actually nothing but great news for you here.

 

You get many more tax benefits when you're married than you do from filing as head of household.  First, your standard deduction is doubled to the joint standard deduction amount of $12,600.  You can also claim the kids as your qualifying children on your joint return, so in your situation (3 dependents & a spouse) you will also get five $4,100 exemptions.  That alone means that $33,100 of your joint income is not taxable right off the bat.  Add to that $3,000 worth of child tax credit (you're well under the $110,000 MFJ income phase-out limit for the child tax credit) and now $36,100 of your income is not taxable.

 

When it comes to your husband's job or business, whichever it may be, he will attach a Schedule C to the tax return on which his contractor income is reported.  He can also deduct any unreimbursed expenses that he incurs in his line of work directly against his contractor income on the Schedule C.  You & your spouse are only taxed on your spouse's net income from his contractor work, so your joint income may be less than the $65,000 that you're thinking it is which would result in less tax.

 

Deductions for an independent contractor may include supplies, business use of phone, work clothes, vehicle expenses, home office expenses, and other items.  Of course what all your spouse will be able to deduct depends upon his work situation and the expenses he incurred throughout the year.

 

On top of all of that, when you file jointly your tax rate is lower than the tax rate you'll be at with any other filing status, so your tax will be slightly lower as a result of that as well.

 

If any of the children are in daycare and under age 13 you can also still take advantage of the dependent care credit which is worth up to $1,050 per child.  It's based on a combination of eligible childcare expenses and your income but does not have an income-based phase-out.

 

So my advice to you is that you have nothing to lose on your taxes by getting married & perhaps a little bit to gain.  Congratulations & I wish you and your new husband the best.

 

Louis,

Senior Tax Advisor (Tampa, FL)