The information in this article is up to date for tax year 2024 (returns filed in 2025).
Going from a single person to married couple changes your life dramatically. It affects your living situation, finances and even your taxes. If you were married by December 31st, for tax purposes, you’re considered married for the entire year. Here’s what newly married couples need to know about their taxes.
Understand Your Filing Status
Tax filing status is a crucial aspect of the tax preparation process. It determines the tax rates, deductions, and credits that apply to an individual’s or couple’s tax return. There are five tax filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er). Each status has its own set of rules and requirements, and choosing the correct status is essential to ensure accurate tax reporting and minimize tax liability.
For newly married couples, the most relevant statuses are “Married Filing Jointly” and “Married Filing Separately.” The “Married Filing Jointly” status often provides the most tax benefits, but there are situations where “Married Filing Separately” might be more advantageous. Understanding these options can help you make the best decision for your financial situation.
Benefits of Married Filing Jointly
Married Filing Jointly (MFJ) is the most common tax filing status for married couples, and for good reason. It offers several benefits that can lead to a lower tax bill. When you file jointly, you can combine your incomes, deductions, and credits, which often results in a lower overall tax liability.
One of the significant advantages of filing jointly is the increased standard deduction. For the tax year 2024, the standard deduction for couples filing jointly is $29,200, which is significantly higher than if you were to file separately. Additionally, filing jointly allows you to deduct more medical expenses, claim a higher standard deduction, and benefit from a lower effective tax rate. Certain tax credits, such as the Earned Income Tax Credit and the Child and Dependent Care Credit, are also more accessible when you file jointly.
When Married Filing Separately Is More Beneficial
Most of the time it’s more beneficial for married couples to file taxes together, but there are some exceptions to the rule. If you can’t trust your partner to be completely honest on their return, don’t file together. When you file jointly, both parties are responsible for any information provided. So, if your partner gets caught in a lie, you’ll be in trouble too. Also, if your spouse owes back taxes, is behind on child support payments or has defaulted on federal student loans, you may be better off filing separate because the IRS can seize your refund.
How married filing separately works involves adhering to specific rules and understanding the implications of this filing status, such as different tax brackets and limited deductions compared to filing jointly. When choosing to file separately, married couples may miss out on certain tax benefits. Here are some credits and deductions they typically cannot claim:
- Earned Income Tax Credit (EITC)
- Child and Dependent Care Credit
- American Opportunity Credit (for education expenses)
- Lifetime Learning Credit
- Student Loan Interest Deduction
- Certain tax benefits related to IRA contributions
Filing separately can limit your access to these valuable tax benefits, so it’s important to weigh the pros and cons before making a decision.
Update Your Mailing Address
Sometimes moving in together requires getting a bigger place. When that happens, don’t forget to inform your employer of your new address. At the end of the year when it’s time to send out those W-2’s, you want to make sure yours goes to the right address. It’s also a good idea to update your address with the USPS so you don’t miss any important bills during your move.
Additionally, you may want to submit a change of address with the IRS using Form 8822. Updating your address with the IRS ensures that all important tax documents and correspondence reach you without delay. This is particularly important when expecting tax refunds or notices regarding your tax return.
Change the Name on Your Social Security Card
Once you decide to start using your married name, be sure to notify the Social Security Administration. You need to keep them in the loop, so your new name matches the SSN they have on file for you. If you try to use your married name on your tax return without informing them of the change, your return will be rejected. There’s no overnight fix either. It can take weeks to be processed which obviously slows down your refund. To report your new name, you must complete and submit Form SS-5 to your local Social Security office.
Check Your Tax Withholding
After tying the knot, it’s essential to review your tax withholding to ensure you’re not overpaying or underpaying your taxes. Changes in your combined income, deductions, and credits can affect your withholding needs. The IRS Tax Withholding Estimator on IRS.gov is a handy tool that can help you determine the correct amount of withholding.
It’s also a good idea to review IRS Publication 505, Tax Withholding and Estimated Tax, for more detailed information. Adjusting your withholding now can prevent surprises when it’s time to file your taxes and help you manage your cash flow more effectively throughout the year.
Coordinate Your Benefits as Newlyweds
As newlyweds, it’s important to coordinate your benefits to maximize your financial well-being. This includes reviewing health insurance plans to determine the best coverage option for both of you. Consider whether it’s more cost-effective to be on one spouse’s plan or to maintain separate coverage. Additionally, evaluate other employer-provided benefits such as retirement plans, life insurance, and flexible spending accounts. By aligning your benefits, you can take full advantage of potential savings and enhance your overall financial strategy as a married couple.
If you or your spouse has health coverage through the Health Insurance Marketplace, it’s crucial to inform them of your recent marriage. This update is necessary because it can impact your eligibility for the Premium Tax Credit, a valuable tax benefit that lowers the cost of your health insurance premiums. By reporting your marriage, you ensure that your information is current, allowing you to receive the appropriate amount of credit and avoid any surprises when filing your taxes.
Retirement Contributions and Planning
Marriage opens up new opportunities for retirement planning. Even if you’re a stay-at-home mom or dad, you can still save for retirement. Typically, contributing to an IRA requires earned income, but married couples have a unique advantage. If your spouse works and you file a joint tax return, they can make contributions to a Spousal IRA on your behalf. These contributions are solely yours, not part of a joint account. For 2024, the IRA contribution limit is $7,000 ($8,000 if you’re aged 50 or older).
In addition to IRAs, consider taking advantage of the Saver’s Credit, a valuable tax benefit that can reduce your tax liability. It’s designed to encourage low- and moderate-income earners to save for retirement. If you contribute to an IRA or employer-sponsored retirement plan, you may qualify for a credit of up to $2,000 for married couples filing jointly. This credit can be a significant incentive to boost your retirement savings.
Effective retirement planning involves evaluating your financial goals, understanding the tax implications of your contributions, and maximizing your tax benefits. By coordinating your efforts as a couple, you can enhance your financial security and work towards a comfortable retirement together.
Selling Your Home
When you sell your home, a portion of your profit may be tax-free if the place was your primary residence for two of the last five years. The time doesn’t have to be consecutive. Married couples have the clear advantage over singles when it comes to how much profit can be excluded. Singles can exclude up $250,000 of profit, meanwhile married couples filing a joint return can exclude up to $500,000.
Tax Planning for Newlyweds
For newlyweds, tax planning is an essential part of financial strategy. Start by identifying the most advantageous tax filing status for your circumstances, whether that means filing jointly or separately. Review your tax withholding to ensure it aligns with your new combined earnings, avoiding any unexpected issues during tax season.
Consider merging your financial accounts for easier management and increased transparency. It’s also important to update beneficiary designations on retirement accounts and insurance policies to reflect your new marital status.
Evaluate your insurance coverage to ensure it offers adequate protection for both partners. This includes health, life, and property insurance. Additionally, look into tax deductions and credits that may be available to you as a married couple, such as the Child Tax Credit or education-related tax benefits.
Proactive tax planning can greatly reduce your tax liability and help you take full advantage of available tax benefits. By staying informed and taking action, you can establish a strong financial foundation and work towards achieving your long-term financial objectives together.
Ready to take control of your taxes as a newly married couple? With the right tax strategies, you can maximize your refund and minimize stress. Trust ezTaxReturn to guide you through the process, offering easy, fast, and reliable filing. Don’t miss out on potential savings – file your taxes today with ezTaxReturn and enjoy a smoother tax season!”
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
