Tax Strategies When You Say “I Do!”

tax strategies

How Marriage Changes Your Taxes.

After you get married, there are a lot more changes to your tax return than just your filing status. After deciding if you will file separately or together, you and your new spouse have a whole host of other tax strategies to review – many of which can save you money come tax time!tax strategies

Tax brackets.

These brackets will determine the highest rate of tax imposed on your income.  Tax brackets are different for each filing status, so your income may no longer be taxed at the same rate as when you were single. When you are married and file a joint return, your income is combined — which, in turn, may bump one or both of you into a higher tax bracket.

Changing your W-4.

Because of the additional exemption and higher standard deduction you are allowed to claim on a joint tax return, it may be wise to change your Form W-4 with your employer to reflect these changes.  Claiming an additional allowance and/or changing withholding to the “married” rate on your Form W-4 means that less taxes are withheld from your pay.

Itemizing vs. claiming the standard deduction.

When you file your return each year, you have to determine if it is more beneficial for you to itemize as opposed to claiming the standard deduction. Once you are married and own a home, many people find that it is more advantageous to itemize their deductions — typically because deductions such as mortgage interest result in a higher total deductible amount than the standard deduction.

Gift taxes and estate planning.

Spouses are allowed to give unlimited gifts of cash or other property to one another free of gift taxes. This provision has important implications for estate planning purposes, so be sure to revisit your estate plan once you get married.
– via HRBlock Talk

What Goes Up Must Come Down

It’s important to remember that while there are some major benefits of married taxes, there are a few downsides, too. Keep in mind that your marital status is as of December 31 is what decides your filing status for the rest of the year, no matter when your wedding day fell on the calendar.

Tax downsides to marriage

There are tax benefits to nuptials, but some drawbacks exist as well. They don’t mean you shouldn’t get hitched; just consider them unwelcome gifts, along with that third toaster oven and the cheap fondue set.

First, once you sign the joint return, you are fully responsible for every number that’s in it. If your spouse fudges a figure, you’re equally liable for the consequences. The University of Denver’s Kevin O’Brien noted that you aren’t responsible for your spouse’s mistakes or deliberate omissions if they happened in the years before you married or if you can prove that you didn’t know about them.

Also, it might be harder to reach the higher minimum percentages of income necessary to be able to deduct medical or miscellaneous expenses, given the combined income, unless one or both of you had significant expenses. And finally, if there’s a garnishment for an unpaid loan or child support against a spouse, a refund could be delayed or blocked, O’Brien said.
– via turbotax.intuit.com

Has your financial life changed much since getting married?

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