Are you planning to get married but is worried about how you’re going to be dealing with taxes once you join the married folks club? Although marriage symbolizes true love and compatibility being among the best, knowing whether or not it offers great news to your tax obligations is also important so you can prepare for you and your soon-to-be family’s future.
Check out these top 10 tax changes after marriage to get a better view on what’s to come after you say, “I do.”
Filing Status
The only filing status you will be using when you file your tax return after your marriage are married filing jointly and married filing separately. The filing status is changed on December 31 of each year which means even if you were not married for most of the tax year, you cannot file as single if you got married on that date. It is generally the married filing jointly filing status that provides more benefits in terms of taxes for most couples due to some deductions and credits that are reduced or not available to the couples who chose to file separate returns.
Tax Brackets
The highest rate of tax imposed on your income will depend on the tax brackets. They’re different for each filing status which means your income may no longer be taxed at the same rate as when you were still single. As a married couple who filed a joint return, your income will be combined which will result in bringing one or both of you into a much higher tax bracket.
Exemptions and Standard Deduction
For married couples filing jointly, two personal exemptions can be claimed in your tax return, that is one for each of you. Notice how it’s different when you filed as a single individual. The standard deduction allowed on the tax return for married filing jointly is also higher. The standard deduction allowed for single taxpayers is $6, 350 while married couples filing jointly can deduct up to $12, 700.
Furthermore, if you have children, you can claim a dependent exemption from each child on your tax return. Generally, the deduction can be as much as $4, 050 for 2017.
Have a New W-4
Since the additional exemption and higher standard deduction is available for a joint tax return, it’s best if your change your Form W-4 with your employer to make sure these changes are reflected. The taxes withheld from your pay is lesser when you claim an additional allowance and/or change withholding to the “married” rate on your Form W-4.
Selling or Purchasing Your First Home
Your combined income after you get married may allow you to buy your first home or you may choose to sell individuals homes owned before you got married. When you own a home, you can deduct the interest you pay on your mortgage on your tax return as an itemized deduction. Selling a home, on the other hand, means the amount you gain can be excluded from income changes from $250, 000 to $5000. However, you need to keep in mind that if only one of your own the home before the marriage, the exclusion of $500, 000 is only applicable if you both lived in the home, treating it as your main home, within two years.
Choose Between Itemizing and Standard Deduction
You have to figure out whether or not it is more beneficial for you to itemize or claim the standard deduction when filing your return each year. A lot of couples find that to itemize their deductions is better because deductions including mortgage interest results to a higher total deductible amount compared to the standard deduction.
Gift Taxes and Estate Planning
It’s safe for spouses to give unlimited gifts of cash or other property to each other without worrying about gift taxes. Although you may still need to revisit your estate plan after you get married because there are certain provisions with important implications for estate planning purposes.
Social Security Name Change
Make sure you notify the Social Security Administration (SSA) of any name changes that take place since your return is filed under your Social Security Number. The SSA will process the change in the system and pass on the information to the IRS before you file your tax return. Do not file until the name change process is finished to prevent any complications if the name on the return does not match the SSN on file with the SSA.
