Now that you are a married couple, your tax situation will be different. Combining incomes can affect your tax bracket, withholdings, benefits, and eligibility of credits and deductions. It’s best to prepare as early as possible. That’s why we’ve put together a basic tax prep checklist that should make it simpler and easier to file your tax return as a married couple. Here are five things you’ll need to do to get ahead of your tax situation:
1. Decide if you’ll file jointly or separately
For tax purposes, your marital status at the end of the year determines how you will file for the entire year. What this means is, even if you got married in November or December, the IRS considers you as married for the entire year for tax purposes. You have the choice to file jointly with your spouse or separately. But because you’re no longer single, you can’t file as single.
If you decide to file jointly, you may find yourselves in a higher tax bracket when you combine your incomes for tax purposes.
Fortunately, Congress has taken steps to ensure that couples don’t pay significantly more in taxes just for combining their incomes. When you file your taxes with TaxSlayer, the deduction finder goes to work to find all possible credits and deductions to keep your tax bill as low as possible, so you get the biggest refund you deserve. Then you can use our refund calculator to see how your spouse’s income may impact your refund or tax bill.
2. Update your W-4
When you started at your job, your employer asked you to fill out Form W-4, Employee’s Withholding Allowance Certificate. The amount of federal income tax that has been withheld from your pay is based on your personal and financial situation at that time. Now that you’re married, you’ll want to revisit the Form W-4 and change your marital status, even if you plan to file separately, so your withholding better reflects your current situation and helps avoid over- or under-paying taxes throughout the year.
To help account for two incomes, consider using the IRS Tax Withholding Estimator, adjusting the multiple jobs worksheet on the W-4, or increasing withholding on one or both paychecks. You can also choose to have more withheld each pay period to avoid a surprise bill at tax time. Don’t forget to review and update your state withholding as well, since state taxes may also be affected by your new marital status and combined earnings.
Note: If you and your spouse both work, your combined income may move you into a higher tax bracket. This means a portion of your income could be taxed at higher rates, and your total tax bill may increase if withholding isn’t adjusted properly.
3. If you changed your name, get a new Social Security card
When you file a tax return, your name and SSN must match the records held by the Social Security Administration. If one of you changed your name, you’ll need to report the change and file for a new Social Security card. It’s best to do this as soon as possible after your name change, since processing can take a few weeks and delays could affect your ability to file your taxes without issues.
If it’s already time to file and you haven’t updated your Social Security card yet, file your return using the name currently on file with the Social Security Administration to avoid processing delays or rejected returns – then complete your name change as soon as you can.
But there’s more. Married couples have some options when it comes to claiming Social Security that single individuals do not. Coordinating your retirement savings and benefits with your spouse’s can help you both get the most out of Social Security.
For example, when you begin drawing Social Security, you could claim benefits based on your own earnings, or you could claim 50% of your spouse’s benefit. This is a major advantage if one of you doesn’t work or earns significantly less income than the other. Another advantage – known as the survivor benefit – says that when one of you passes away, the surviving spouse will continue to receive the higher of the two benefit amounts.
It’s important to note that Social Security only makes up a portion of the income you and your spouse will receive in retirement. The rest is up to you – so you may want to begin setting aside more income for retirement now that you’re married.
4. Buying property? Report your new address and learn about available tax breaks
Not everyone buys a home when they get married, but for some couples, investing in a property together is a goal. As a bonus, you and your spouse can qualify for some significant tax breaks. For example, the Mortgage Interest Deduction allows you to deduct the mortgage interest on up to $750,000 of qualified debt if you are filing jointly.
Both spouses don’t have to be on the title or mortgage, but there are a few important considerations. If you buy a home together, deciding whether one or both names go on the deed can affect ownership rights, liability, and how the property is handled in the future. In many cases, couples choose joint ownership so both parties have legal rights to the home. If one spouse purchased the home before marriage, they can keep the title in their name alone, but adding a spouse later may have tax implications depending on your state and how the property is classified (separate vs. marital/community property).
If you decide to sell a home and you sell it for more than you paid for it, the law says that as a couple, you can exclude up to $500,000 of capital gains – as long as you meet certain rules. If you file separately, you can exclude up to $250,000, using the Capital Gains Exclusion. After you move into your new place, be sure to let the IRS know by filling out Form 8822, Change of Address.
There are plenty of tax breaks available for newlyweds who rent before investing in a home. Learn about seven credits and deductions you may be eligible to claim the next time you file taxes.
5. Check on your benefits
If you purchase your health insurance through the Health Insurance Marketplace, certain factors like marriage, family composition, and changes in income will affect how much you receive as your premium tax credit.
Now that you are married, you’ll need to report the changes in circumstances to the Marketplace. This will allow them to adjust your advance payment amount and ensure that your premium tax credit is accurate when you file your return.
Even if you don’t use the Marketplace, it’s still important to review your health insurance coverage after getting married. You may choose to join one spouse’s employer-sponsored plan, compare costs and coverage, or adjust dependents and beneficiaries.
You should also take time to review other workplace benefits that may be affected by your new marital status. For example, if you or your spouse contribute to a Flexible Spending Account (FSA) or Health Savings Account (HSA), you may want to adjust your contribution amounts. Married couples should also be mindful of contribution limits and eligibility rules, especially for HSAs, which are tied to specific health plan types. You should also consider updating beneficiaries on accounts like life insurance policies, retirement plans, and other employer-sponsored benefits to reflect your spouse if needed.
