How Marriage Changes Your Taxes


If wedding bells rang for you last year, your life likely looks a lot different than it did when you and your sig-o were dating. Whether you moved to a new place, changed your last name, or merged your budget, getting married is a major life change and probably impacted almost every aspect of your life, including (and most importantly!) your finances.

You might still be in that perfect newlywed bliss season, but tax season is also here and it waits for no one. But don’t fret: this is a great time to dive into your finances, get on the same page, and make decisions that your future selves will be thankful for.

Tax season can be hectic, and there are certainly some changes you and your partner should be aware of now that you’re officially married. Even though it can feel daunting, you don’t have to go it alone. Below, we’re breaking down how you can expect your taxes to change if you got married last year. 

 

What Newlyweds Should Know About Their Tax Options

Filing jointly with your spouse has its pros and cons

If you’re newly married and preparing to file your taxes this year, your first step is choosing whether to file jointly or separately. Each filing status can be beneficial to you as an individual and as a couple, depending on your finances from last year.

Filing jointly as a married couple has its benefits. If your spouse has a lower income and is in a lower tax bracket, it can put you both in a lower tax bracket, reducing your tax liability overall and give you more money on your return. Contributions made to a company flexible spending account, or FSA, charitable donations and more also count towards your tax liability. If you or your spouse have contributed to either of these last year, filing jointly will help you both reduce your taxes vs. claiming these contributions separately.

If you plan to file taxes with your partner this year, be mindful of how much you each make. Two high income earners might not benefit from filing together, since you may owe more than if you file separately. Additionally, filing jointly means taking on your spouses’ liabilities like unpaid back taxes or child support. In cases like this, the best decision for you as a couple may be filing separately. Before you make a decision, have a long hard look at your financial history and liabilities and talk through your options together.

 

You can still file separately, but it might cost you more

The Married Filing Separately tax status is also available to you if you got married last year. Filing separately means that you and your spouse choose to file individual tax returns and are not responsible for each other’s income, individual deductions, or tax liabilities. Be mindful that this is not the same as filing Head of Household or any other tax status, as the IRS acknowledges that you are now legally married, and you would need to file as such.

Filing a separate tax return means that you are able to take advantage of all the deductions and credits available to you based on your financial decisions from last year, and not your spouse’s, which could adversely impact you, depending on their situation. Filing your tax return separately functions similarly to how you filed before you were married: you still will need to claim all of own your income, deductions, and tax credits separate from your partner, even if you have combined finances.

When filing separately, you don’t risk the chance of being audited because of missing income, unpaid taxes, or expenses, since you are only responsible for yourself and your financial situation. Filing separately means that you can protect yourself and your tax return. If your individual AGI, or adjusted gross income, is lower than if you were to file jointly with your partner, you may be able to claim larger deductions on your return, which gives you a bigger refund.

Unfortunately, when filing separately, some tax breaks will not be available to you as a single filer, like the Earned Income Tax Credit, since a two-income household by marriage typically doesn’t qualify for it.

Some tax credits would also need to be split in half and claimed by both you and your spouse equally when you file, like the Child Tax Credit or the capital loss deduction. Neither person can claim the full amount on their individual taxes due to their marriage status. Additionally, if your spouse itemizes their deductions, you cannot claim the standard deduction on your own. You must also itemize your deductions as well.

 

Name changes could affect your refund processing

If you changed your last name to your partner’s last name when you got married, make sure you’ve fully completed the name change process, otherwise tax season could be an even bigger headache for you than it already is. Whether you’ve decided to simply change your last name, update your middle and last name, or hyphenate your last name after getting married, make sure you’ve reported that change to the Social Security Administration.

Not updating your name properly and prior to filing your taxes could result in delays in processing your tax return. And if you’re getting a tax return, that’s not money you want left on the table for long.

 

One Last Reminder

Tax season doesn’t have to surprise you or your partner. Before deciding how and when to file your taxes this year, have an open conversation with your partner about each other’s finances, from your incomes to debts you may have to business expenses. Open the lines of communication to discuss each other’s finances and financial goals so that no matter how you file, you’re on the same page.

Before filing your taxes this year, use an online tax tool like Intuit’s Turbotax TaxCaster to estimate what your tax return will look like if you both filed separately vs. filing together. Seek a tax professional, like a Certified Public Accountant or trained tax preparer, for more guidance on how to file taxes this year if you got married last year. They should be able to walk you and your spouse through all of the changes that will impact each of your tax returns by combining assets and changing your filing status from unmarried to married.

Although tax season isn’t as enjoyable and blissful as the rest of the newlywed phase (we know!), the two can coexist peacefully this year with preparation, research, and open communication. Plus, if you make open communication about your finances a habit now, you’ll be setting your marriage up for success in the future.

 



Brace Yourselves, It’s Time: The Lazy Girl’s Guide To Tax Season



Source link

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top