Take it from me: Marriage can be really, really, really hard, but it’s totally worth it. As life decisions go, getting hitched is a good deal.
Not only do you get some sweet rings, a pile of wedding gifts, a honeymoon and a life partner, but you also get tax breaks. Bonus!
When you tie the knot with someone, you’re tying your taxes together, too. (That’s super sexy, I know.) Matrimony will definitely affect your taxes, probably for the better.
8 Things Newlyweds Should Know Before They File
Here are the eight most important things to know about taxes after getting hitched:
1. If You Get Married at the End of the Year, You’re Married for the Whole Year.
According to the IRS, at least.
Even if you say “I do” on Dec. 31, for tax purposes, the IRS considers you “married” for the entire year. Come next April 15, you won’t have the option of filing your taxes as a single person. You have to file as a married person.
2. You Need to Let the SSA Know If You Changed Your Last Name
If you change your last name when you get married, notify the Social Security Administration with this form. That way, the SSA’s records match the name and Social Security number you fill in on your tax return.
3. You Also Need to Change Your Withholding Status.
If you and your new spouse both work, take a look at how much federal income tax your employer withholds from your paycheck. It may be time to change your withholding status from “single” to “married” using Form W-4.
Use this online IRS withholding calculator to avoid having too much or not enough money withheld from your pay.
Pro tip: You don’t want to end up owing the IRS money. Apparently that’s not much fun.
4. It’s Almost Always in Your Favor to Choose This Filing Status
In all seriousness, this is your biggest decision. As newlyweds filing taxes as married people for the first time, you’ll choose between “married filing jointly” or “married filing separately.”
Spoiler alert: You’ll almost certainly go with “married filing jointly” — almost every couple does. That’s because you’ll probably pay less that way.
Filing your taxes jointly makes you eligible for more tax breaks. In its Tax Tips for Newlyweds, the IRS advises: “You may want to figure the tax both ways to determine which filing status results in the lowest tax. In most cases, it’s beneficial to file jointly.”
5. Hold on a Minute. What About the Marriage Penalty?
Ah, yes, the marriage penalty. You’ve probably heard of that. It’s what happens when spouses who file jointly end up owing Uncle Sam more than if they had just stayed single.
Married people complained about this glitch in the system for years. Believe it or not, they complained so much that Congress actually did something. As Denver financial planner Valerie Antonioli tells TurboTax’s website, “Congress took steps to reduce that penalty, ensuring that the joint tax bill for married couples remains closer to the combined total they would have owed as single taxpayers.”
With the way U.S. tax brackets are set up, you’re more likely to get hit with a marriage penalty if you and your spouse are both high earners and pull in about the same salary. This article from MarketWatch lays out an example in which a husband and wife each make $90,000 a year, so they pay a marriage penalty of $843.
6. Most Spouses Collect a ‘Marriage Tax Bonus’
Couples filing jointly can claim two tax exemptions on their income tax returns and could qualify for tax breaks like these:
An article on the TaxAct website details another common reason married couples save money on their taxes: “If a person in a high income tax bracket files jointly with someone in a much lower income tax bracket, their income together is taxed at a rate somewhere in between – generally resulting in a much lower total tax than they were paying as two single taxpayers.”
7. To Itemize or Not to Itemize — That is the Question
Whether you’re single or married, you can either claim the standard deduction or itemize your deductions — whichever works out better for you. But once you’re married and have a mortgage, you can probably lower your tax bill if you itemize.
As your life becomes more complicated, the same thing happens to your taxes. If doing your own taxes is starting to give you a headache, it might be time to hire a professional to do them for you.
8. Watch Out for Your Spouse’s Past Tax Issues
Hopefully your new husband or wife is honest and has a handle on their finances. If you file a tax return jointly, you’re legally on the hook for any of your spouse’s tax-related misdeeds, omissions, underpayments or mistakes. The IRS will hold you both accountable for every number on that tax return.
If your beloved’s taxes are a train wreck, it might be wise to file separately. Just a little something to keep in mind.
So congratulations, newlyweds! Those are the eight most important things to know about how getting married affects your taxes. Enjoy that lifelong companionship, that new fondue set and all those tax advantages.
In the eyes of the IRS, you’re in this together now.
For richer or for poorer. For better or for worse.
Your Turn: Have you taken advantage of marriage-related tax breaks? How?
Mike Brassfield (mike@thepennyhoarder.com) is a senior writer at The Penny Hoarder. His taxes are way too complicated for him to do all by himself.
The post For Richer or Poorer: 8 Ways Getting Married Affects Your Taxes appeared first on The Penny Hoarder.
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