After getting married, many things change. Among all the other changes, there are also financial changes. Your spending and saving habits affect each other and your financial plans can change. The way you handle your taxes will also change.
If you got married in 2017, hopefully you’ve already considered the impact on your taxes.
But if you haven’t thought about it yet, there are several things to keep in mind:
- You’re on the hook for any discrepancies on your joint tax return. This is the primary disadvantage with regards to taxes when married. You have to sign the tax return, even if your spouse did all the work.
- You are just as liable for any mistakes or fraud as your spouse. Ensure you know what you’re signing.
- There are advantages for retirement planning. For example, a non-working spouse can still contribute to an IRA. However, the other spouse must have earned money that year.
- You can sell your house and keep more of your profits. As a single person, you can deduct up to $250k in capital gains. Married couples can claim up to $500k. Both of you must have lived in the house for at least two of the previous 5 years.
- It’s okay if only one of you owned the home, as long as you both resided there.
- The amount you can deduct for charitable donations increases. The current limits are determined by income. By combining your incomes, the limit is raised. While this doesn’t really help couples that are already married, it can be useful if you’re getting married. If you made a donation above the limit, getting married can be a good thing.
- If any state considers you to be married, so does the federal government (at least for federal tax purposes).
- In August 2013, the IRS ruled that all legal same-sex marriages are recognized for tax purposes. This holds true even if the couple is currently living in a location that doesn’t recognize same-sex marriages. Feel free to get married in another state and then head back home.
- Your marital status on December 31st is what matters. For tax purposes, you were married for the whole year.
- Similarly, if you get divorced during the year, you’re considered unmarried for that entire tax year.
- If your spouse dies, you can still claim to be married for that year.
- You can shop for benefits. If you’re both employed, you probably have the option of picking the best combination of benefits for your family. Perhaps one spouse has a better 401(k) plan, and the other has a better medical plan.
- The 401(k) plan could be used to the maximum, and any extra family money could be put towards IRAs.
Marriage has a lot of perks, and that includes some tax advantages. Ensure that you and your spouse are on the same page when it comes to finances. Money is a common source of stress and disagreement among couples. Avoid letting tax season add to your financial challenges. Encourage open and honest conversation and get professional help with your taxes, if needed.