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Your wedding was a blast. Your honeymoon’s a sweet
recent memory. Now, as you take the first everyday steps together in your life
of wedded bliss, it’s time to think about how being getting hitched makes life
different—including getting ready for some new realities when it comes to
taxes. Here are a few tips to get yourself ready for your first married
tax season.
1) Name and address.
First, take care of
basics. If one or both of you changes your name, make sure you get yourself a
new Social Security card so everything matches up at tax time. If there’s been
a change in residence, make sure you notify the Internal Revenue Service and
the Social Security Administration of your new address. Also, if you’ve done
any freelance work that will generate a 1099, let the client know so they can
get your name and address right when the time comes. Finally, if you purchase
health insurance through an Obamacare marketplace, let them know about your new
name and status, which can affect the subsidy you’re eligible to receive. You
can get an application for a new Social Security card at www.ssa.gov, or by calling 800-772-1213.
2) Think about filing status.
Should you file
separately or jointly? Fortunately, this is usually an easy decision to make,
since there aren’t many scenarios when filing separately is beneficial. In
fact, according to U.S. News & World Report, pretty much the only situation that would provide
benefits for filing separately while married is when one partner is a low
earner with huge medical bills (exceeding 10 percent of gross income)—or when
one partner doesn’t trust what the other is doing with their own taxes. If the
latter’s the case, you probably have bigger problems brewing than your taxes.
In fact, you might want to consult a tax attorney (and maybe a
marriage counselor, too).
3) Review your tax withholdings.
Once you’ve settled on a
filing status, you want to be sure that your tax withholdings are in line with
your decision. That means reviewing, and likely revising, your W4, the form that directs your employer on how much
federal income tax to withhold from your paycheck. If you neglect this step,
you’re probably going to get a surprise at tax time—either you’ll have had too
little or too much tax withheld.
4) Prepare for bracket jump.
Combining your incomes
will most likely push you into a higher tax bracket than you would have been in
on your own. For example, single taxpayers hit the 28% tax bracket at $91,151
of income, while a married couple filing jointly fall into that bracket at
$151,901—far less than two times the single taxpayer threshold. Known as the
“marriage penalty,” this is most likely to happen when couples have very
similar earnings and deductions. To counter this, take a close look at possible
tax breaks you may not have had before. According to Intuit, this includes things like your spouse’s losses on
investments, as well as dependent care, education, and mortgage interest
credits.
5) Enjoy the perks.
Marriage does confer
some special benefits, tax-wise. Despite the marriage penalty, Money reports that over 50
percent of married couples filing jointly pay less than they would if they were
single. According to ABC News, one way couples can benefit from marriage is by
having their spouse’s deductions (let’s say that student loan that won’t ever
seem to go away) apply to the couple’s joint return. There’s also a huge bump
on the standard deduction—double the deduction for single filers. Finally, if
one spouse is unemployed, they can have an IRA, and the phased benefits are
much better than for single filers.
6) Home sweet home.
Most married couples
aspire to buy a home…and sometimes that involves selling a residence that one
of them already owns. The good news is that the tax-free capital gains you can
take from the sale doubles when you’re married (assuming the owner lived there
for at least two of the five years before the sale). And once you’re settled in
your new nest, you can deduct your mortgage interest—one of the most generous
tax benefits available.
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