5 Must Know Tax Tips for Newlyweds
5 Must Know Tax Tips for Newlyweds
If you've gotten married in the past year or you're getting married soon, taxes may be the last thing on your mind. These tips can make your transition from single to married tax filing status go smoothly.
Relatives, friends, and old flames aren’t the only ones who need to know about your new marital status. Other important parties to notify include your employer, your state’s department of motor vehicles, and the Social Security Administration (SSA). Changing your name with SSA is especially important for filing your taxes. Any delay in reporting the change could cause a lag in processing your tax return. In addition, if a name on your tax return doesn't match SSA records, it can delay the IRS processing of your return.
Once you've said, "I do," the IRS gives you two choices for your tax filing status: married filing jointly or married filing separately. They will consider you married for the entire calendar year of your wedding date, even if you married on the last day of December. Your filing status affects what tax deductions and credits you can claim and the amount of tax you will owe for the year. In many cases, filing a joint tax return is best. If you and your spouse have similar income and no children from previous marriages, the tax deductions for married filing jointly may be better than filing separately. Student loans, back child support, tax liens, and other debt could make it more advantageous for you to file separately. Ask your tax advisor for some guidance about your specific filing status.
You will have to fill out a new W-4 for your employer to note your new tax filing status and any change of name or address. The W-4 helps your employer estimate the right amount of tax to withhold from your paychecks. If you and your spouse decide to file separate tax returns (married filing separately), your tax withholdings may not change. However, the tax status married filing jointly will require other changes on your W-4 besides your name and address.
Your new marriage might come with dependents, children, or adults who live in your household whom you support. Be sure to complete Step 3, Claim Dependents, of your W-4 to adjust your tax withholdings appropriately. You will also include your spouse's income in Step 4, Other Adjustments, of your W-4. You can also use the Deductions section in Step 4 to account for any other household income on which you anticipate owing taxes, like investment payouts or 1099 income from a contract job.
Weddings are expensive, but with the right choices, you could be able to deduct some of the costs on your taxes. Payments for a nonprofit venue, like a museum or church, can be considered charitable donations. Donating your dress, flowers, or leftover food to charity after your wedding can also result in tax deductions. If any single donated item, like the dress, is valued at more than $5,000, you'll need a written appraisal to submit with your tax return.
Married couples filing jointly who meet specific criteria can open a spousal IRA. An IRA is a tax-advantaged retirement account that lets you invest pre-tax or taxed income for use when you retire. If your spouse does not work or earn an income, you could open a spousal IRA for them as long as you are earning an income. A spousal IRA is not a joint account. It is an investment owned by the nonworking spouse and funded by the wages of the working spouse. The benefit is that instead of paying taxes on your excess income, you can invest it tax-advantaged to support your spouse after you retire. There is a limit to the amount of money you can invest in an IRA each year. For high-income individuals, a spousal IRA could be a marital tax benefit.
While marriage can make taxes a bit more complicated, it can also offer some nice benefits, like increased deductions, lower taxes, and only one tax return to prepare. In addition, marriage deductions in the tax code have been aligned to approximately double the single deductions, eliminating previous marriage penalties. Consult a tax expert if you have questions about your married tax filings.