A lot of things change after a wedding: last names, addresses, banking accounts, schedules, priorities, interior decor, and more.
One thing newlyweds don’t always think about is how their taxes change. That’s probably because most people don’t like to think about taxes.
But if you’re getting married soon, or you just got married, it’s good to know what’s ahead of you. Here are a few tax items that are affected by marriage.
Your Filing Status
Every year, one of the first things marked on your taxes and tax related forms is whether you’re single or married.
Since you are no longer single, you won’t be checking that single box anymore. So what box will you check? Well, it depends. There are actually two boxes for married people: “married filing jointly” and “married filing separately”.
The best choice for you depends on your personal situation. We recommend discussing the options with a tax professional so that they can guide you accordingly.
It’s also worth mentioning that it doesn’t matter when you got married. Your status isn’t set until December 31, each year. So as long as you said “I Do” before the New Year’s ball dropped, you won’t be checking the “single” box.
Tax Bracket Changes
As you hopefully know, the amount you’re taxed is based on how much money you make. These tiers are referred to as tax brackets. The higher up you are, the higher percentage you’ll pay.
Depending on how you file your taxes and whether or not both of you work, your tax bracket might change. If you both have good paying jobs and you file together, you may find yourself suddenly paying a higher tax rate than before. On the other hand, if only one of you works, you could actually move to a lower tax bracket.
Utilizing the Other’s Benefits
Once married, you have access to various tax-benefits of your spouse (and visa-versa). This extends beyond health insurance and into more finance-related areas like IRAs. For example, if your spouse is able to put away pre-taxed money in an IRA, you’re able to put money in there as well.
Of course, these often come with restrictions, caps, etc. It’s best to discuss with a finance professional to understand your options.
If both of you have benefits, you can choose to utilize whichever you find to be superior.
No Estate Tax
Estate tax is something that only applies to those receiving a fairly significant inheritance. We’re talking millions of dollars. Still, for those who fall into that category, it’s worth knowing that money/assets passed to a spouse after death are not subject to an estate tax.
You Can Gift to Each Other
Gift taxes are another thing that many people never encounter. However, should you give away more than $16,000 to an individual, you have to pay a tax on it. Unless that person is your spouse.
You and your spouse can gift each other as much as you want without having to pay tax on it.
Sit Down with a Professional
Everyone’s tax situation is different. The best way to understand your taxes after marriage is to sit down with a tax professional. They can advise you on the best course of action, as well as help you discover potential tax breaks you’re now eligible for.
Whether you’re looking for persona tax assistance or professional payroll services in Springfield, OH, LWS is here for you.