The excitement, joy and anticipation of getting married can be almost overwhelming. With the planning that goes into the wedding it is easy to overlook the tax implications of marriage. Although taxes are probably not high on your wedding plan checklist, it is important to be aware of the tax changes that come along with marriage. Here are some basic tips that can help keep those issues under control.
The names and Social Security numbers on your tax return must match your Social Security Administration (SSA) records. If you change your name, it is imperative to report it to the SSA.
A change in your marital status means you must give your employer a new Form W-4, Employee’s Withholding Allowance Certificate.
If you and your spouse both work, your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.
To avoid problems and to get specific advice speak with your tax adviser.
Marriage can have an impact on insurance. It is important that you report changes in circumstances, such as changes in your income or family size, to your health insurance company (or Health Insurance Marketplace). You should also notify your insurance company when you move out of the area covered by your current insurance plan.
Let the IRS know if your address changes.
You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office.
If you’re married as of December 31, that’s your marital status for the entire year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year.
Note: Once married, neither of you can file using single status.
Generally and in most cases, married filing jointly results in a lower amount of taxes due. However, you may want to figure the tax both ways to find out which status results in the lowest tax.
If you are legally married in a state or country that recognizes same-sex marriage, you generally must file as married on your federal tax return. This is true even if you and your spouse later live in a state or country that does not recognize same-sex marriage. See Same-Sex Marriage Tax Guide: 16 Essential Tax Rules and Tips for a more detailed discussion.
Married couples are eligible for many tax breaks. Here are just some examples:
In most situations, filing a joint return presents no problems. However, when filing a joint return it is important to keep in mind:
To avoid this exposure, a spouse filing as married filing separately offers the best option, even though it may result in overall higher taxes. If such situations exist before marriage or arise in the future, it would be wise to discuss this situation with your tax adviser.
In most cases married filing jointly will result in the least amount of taxes being paid. In addition to filing as married filing separately for the reasons discussed immediately above, it may make sense to file married filing separately in the following limited situations. It all depends on the numbers.
Important Point: You Cannot Have It Both Ways: If you decide to file separate returns, you and your spouse must itemize deductions or take the standard deduction. You cannot itemize deductions on your return and your spouse take the standard deduction on his return.
Advance tax planning before a marriage is a good idea. For example, sometimes it may make sense to have a wedding in the following January and not in December, or vice-versa. It all depends on your specific and particular tax and financial situation. In many cases, tax planning can result in some very significant tax savings. Take a look at year-end tax planning strategies at 2020 Year-End Tax Planning Tips: Philadelphia Tax Attorney Offers Strategies To Save Taxes Before Year-End
Also, in cases where older people contemplate getting married, prudence dictates a complete analysis of family considerations, income tax, estate tax and health insurance coverage implications before entering into a second marriage.
It is also important to remember that a prenuptial agreement may make sense in certain situations. For example, unequal amounts of wealth and second marriages are good reasons for having these agreement in place.
Weighing the pros and cons of filing separately is complex and unique to each couple. Many other factors, such as children, Social Security and pension benefits, and residency, impact overall taxes.
If you are getting married, it is always highly recommended to talk with your tax adviser or feel free to contact me sooner than later to get specific advice about your particular tax situation to maximize your tax breaks, minimize your tax bill and to explore the need of a prenuptial agreement in certain situations.
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