Getting married can affect a person’s life in a number of ways. Many people do not realize this but getting married can affect their taxes. There are 10 things that people that got married have to keep in mind when filing their taxes.
Once you are married you will have to change your filing status. You can file as married filing jointly or married filing separately. Married filing jointly allows additional tax deductions and credits that those filing separately do not receive.
2. Tax Brackets
This will determine the tax rate that will be applied to your income. They are different for each filing status. If both spouses work and their income is combine they will be in a higher tax bracket.
3. Exemptions and Dedications
You and your spouse will each get a person exemption. This standard deduction is a higher rate for married couples filing jointly. Married couples can have a dedication of $12,400. Any children that the couple has will allow them to claim a dependent deduction that is around $3,950 for each child.
4. Change W-4
Since you will be allowed more exemptions when filing your taxes, you may need to make changes to your W4 form. Additional allowances can be claimed and you will need to change your status to married. This means fewer taxes will be taken out of your paycheck.
5. Buying or Selling the First Home
When you get married the combined incomes may allow you to purchase your first home. You may also sell and individual home that was purchased before the marriage. Any interest that is paid on the mortgage is tax deductible. When selling a home, the amount of profit can be excluded from income. If the home was owned before the marriage the exclusion may apply only if you both lived in the home for a period of two years.
6. Itemizing Vs. Standard Deductions
You will need to look at if you are better off claiming the standard deduction or itemizing the deductions. Many married people choose to itemize their deductions. Deductions such as mortgages and educational expenses can lead to a higher deduction amount.
Spouses are able to give each other unlimited cash gifts or other property. This may lead to additional tax deductions. After getting married be sure to speak with an estate planner to find out the best way to get these deductions.
8. Name Changes
Many people especially women change their name when they get married. They make take their partner’s name of hyphenate their last names. Be sure the Social Security Administration is aware of any name changes. This must be done before filing taxes. You should wait until your name change is finalized to avoid any problems or confusion with the IRS.
9. Marriage Penalty
A marriage penalty can help when two people that are filing joint returns pay more taxes than their individual tax liability when they were filing as single. This may happen since the marriage filing jointly brackets as well as the standard deductions are not always equal to twice the single income bracket that a person is held in or their standard deduction. This can happen when the lower income tax bracket and the standard deduction for married filing jointly couple are double of what a single individual rate is.
10. Affordable Care Act
If either of the people receive an advanced payment or a premium tax credit for health insurance through the state or federal marketplace this needs to be reported for the marriages as well as any changes. These changes can include moving to another state, the changes in income, and the change in family size. This information is sent to the marketplace. This will allow the marketplace to make changes as needed. The credit may have to be adjusted in some cases. According to the law everyone must have healthcare coverage. If either of the partners do not have health care coverage they may face some tax penalties that can affect their return.
Filing taxes as newly married couple can be overwhelming at first. When a couple is having questions, they should speak to an accountant to find out what deductions are going to work best for their situation and reduce their tax liability.