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.