Planning a wedding takes a huge amount of effort. But as much as you may not want to add one more thing to your to-do list, you really need to get a handle on how getting married will affect your relationship with Uncle Sam and the IRS.
In many cases, getting hitched can mean big changes in your tax situation, and the sooner you start planning, the more likely it is you’ll avoid some huge pitfalls that snare many newlyweds.
Will You Owe More or Less?
The first question you have to figure out is whether being married will boost or cut your tax bill. In the past, tax brackets created a marriage penalty for most two-income couples, but changes to the tax laws eliminated that penalty for lower-bracket taxpayers. On the other hand, families with a single breadwinner could enjoy a marriage bonus that lets you take advantage of lower brackets for more of your income.
Once you figure out whether you’ll owe more or less, the next step is changing your tax withholding from your paycheck to reflect your new tax bill. Because the IRS treats you as married for the whole year regardless of whether your wedding is in January, June, or December, you’ll want to make those adjustments sooner rather than later. In fact, doing so before you get married may be the best way to avoid any penalties if your taxes will go up. To change your withholding, talk to your HR department at work to get a new Form W-4 filled out.
Picking a Filing Status
When it comes time to file your first tax returns, you and your spouse will have to decide whether to file jointly or separately. The decision can make a huge impact on how much you pay in total.
For most couples, filing jointly makes the most sense. Because joint filers get to add up all their income and deductions together, they typically get maximum benefit from the lower tax brackets, cutting their overall tax bill. By contrast, separate filers can end up paying far more in total taxes, especially if one spouse earns a lot more than the other.
However, filing separately sometimes has benefits. The most typical situation happens when one spouse has a great deal of medical expenses or other deductions that are based on total income. By reducing income, you can increase the amount you’re able to deduct.
Another reason to file separately involves potential tax liability. If you file jointly, then both spouses are liable for any taxes, interest, and possible penalties that may arise from a return. A separate return insulates each spouse from the tax liabilities of the other.
Whether you file jointly or separately is up to you, so it pays to work things out both ways and see which one leaves you in a better position.
Changing Tax Benefits
Getting married also affects a host of other tax issues. Here’s a partial list:
- Low-income taxpayers may be eligible for a larger earned income tax credit than when they were single, but typically only if they file jointly.
- Spouses who don’t work are able to make contributions to IRAs if their spouses have enough earned income from their jobs or other work.
- If you live in a state that recognizes community property between spouses, then it can have a marked impact on your returns if you file separately.
- If one spouse has access to perks like a flexible health benefits plan at work, both spouses’ medical expenses are eligible, allowing both to reap tax savings from using the flex plan to set aside money for health-care costs.
- Some other tax benefits aren’t available for separate filers, including the adoption credit, educational tax credits, and deductions for student loan interest. In addition, if one spouse itemizes, both have to itemize even if the other spouse would potentially be better off with a standard deduction.
Taxes can get confusing in a hurry. But by spending a little time thinking through how your trip down the aisle will change your tax situation, you can avoid a more painful experience down the road.