Dealing with the logistics of getting married is kind of like a hangover from the fun stuff. After the ceremony, spending time with friends and family, celebrating with good food, and basking in the post-toast glow, there’s some real paperwork to consider. While taxes are something couples don’t think about too much when preparing for the big day, the details are something to prepare for.
Tax Benefits of Being Married, and Some Penalties, Too
The federal government tried to reduce marriage penalties by raising the income amounts for higher tax brackets in the new tax code. While there are some marriage bonuses, it really all depends on each spouse’s incomes. If both in the party make similar incomes, they may be pushed into a tax bracket. Higher income means higher rates.
The tax brackets comparing 2017 and 2018 are as follows:
The first thing newlyweds will have to tackle is the paperwork. If the bride changes or hyphenates their last name, they must change their Social Security information through the Social Security Administration (SSA), which, let’s face it, isn’t the fastest process. If the newlyweds didn’t live together prior to tying the knot, they would also need to file Form 8822 to notify the IRS of change of address. Furthermore, the newlyweds should update their address with the United States Post Office, which, luckily, due to its forwarding mail feature, is pretty easy.
Married Filing Jointly or Married Filing Separately
The next step is to determine whether the couple will complete a joint return, which can have its own benefits and penalties. When filing jointly, the couple must claim joint income, which is where the penalty could rear its head. Alternatively, if either the bride or groom makes significantly less than the other, it will put them in a lower tax bracket than they might have been as single filers. Filing separately, yet still being married, may result in higher taxes, since there are often exemptions from tax breaks that come from filing together. If someone in the party has student loan debt or high medical expenses, it may be better to file separately. Also, if either fudged their taxes in the past, the spouse is just as liable for back taxes, which may be another reason to file separate returns.
Being married also means both can contribute to an IRA (individual retirement account) regardless if one in the party doesn’t have income. Choosing which benefits to use from either party’s employment also helps if one has a better plan, especially regarding dependent care and health insurance. A married couple can also make larger tax-deductible charitable contributions and pass on their estate to the other when the time comes.
C&D | Navigating Taxes for Newlyweds
One of the better things about being married is filing a single tax return, which saves on time and paperwork. If you’re newly wed, we can help you navigate your tax situation. Our CPAs can help you decide whether you want to claim the standard deduction or itemize since you both have to do one or the other. At C&D, we can help plan your finances with the help of your tax return so that you can look toward the future together as a happy couple.