“Just Married” – Four Tax Tips for Newlywed Couples
February 15, 2019
“The best surprise is no surprise.”
The honeymoon is over, all the gifts have been opened and put away and all the “thank-you” notes written and sent. It’s here that newlyweds make that inevitable transition from wedding bliss to the day-to-day reality of life as a married couple.
That doesn’t have to be a bad thing.
Unfortunately, it’s often here that the couple has their first real discussions about spending habits, onerous school loan debt or maxed-out credit cards. It’s here that the husband and wife suddenly realize that their views about money are totally out of sync with one another.
These discoveries often come as a complete surprise – and not the good kind. They can lead to confrontations, wrenching changes in budgets and lifestyles – an inject stress into what should be the happiest time for the newlyweds.
With the benefit of hindsight, the answer to this problem is a simple one: The couple should have had these frank talks long before the wedding day – and maybe even before the engagement.
Part of this process includes analyzing your tax position as a couple. If you are newly married, or about to get married, it is important to know the tax implications – and to plan accordingly.
Filing Status – Your marital status for tax purposes is determined by your status as of Dec. 31 of the year in which you were married. Individuals who are married before year-end are considered married for the entire tax year. It is important to note that married individuals cannot use “Single” as their filing status for the tax year, even if you were single for 364 days and only married for a single day of the year. You must choose between “married filing joint” or “married filing separate” for the entire year. Newlywed clients should determine which filing status produces the greatest tax benefit. For most couples, “married filing joint” will result in the most significant tax savings. However, this isn’t always the case and your specific situation should be analyzed by (and discussed with) your tax advisor.
Name Changes – Your name on your tax return must match your name on file with the Social Security Administration. If you changed your name, you will need to file form SS-5 before you update your name on your tax return, drivers license, or any other legal documents. A visit to your local Social Security office is usually the best way to initiate this name-change process. You can expect tax-return processing delays if the IRS is not able to match the name and social security number on your income tax return with what is listed in the Social Security Administration’s database.
Tax Withholding and Estimated Payments – Now that your tax status has changed, it is time to review and possibly adjust your wage withholdings. Your new status could make you eligible for additional tax deductions. Or it could push you both into a higher tax bracket. Your tax advisor can prepare a tax projection and recommend the proper tax withholding to ensure that your withholdings are adequate, but not excessive.
Analyze All Possible Tax Benefits – If you file jointly, you will be able to take advantage of your spouse’s tax breaks. You should review any tax benefits you received in the past to determine if you still qualify as a married couple – and to determine any new tax savings that might be available to you. There are several tax credits and deductions married couples can take advantage of.
This brings us back to where we started this chat: Whether you do it before the nuptials, or after the honeymoon, planning is the key.
With great planning, you can implement any strategies that might benefit you before your tax return is filed. At the very least, a meeting and long talk with your tax advisor will help you avoid any surprises when it comes time to preparing your tax returns as a married couple. We encourage you to Contact Us if you have any questions.
Advisory Services offered through SC&H Financial Advisors, Inc. SC&H Financial Advisors, Inc. is a wholly owned subsidiary of SC&H Group, Inc.
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