Tax Season Tips for Newlyweds, Your Guide to Filing Taxes Married
'Tis the season—for filing taxes married. Newlyweds currently accessing their W2s may be exploring the tax benefits of marriage. We know gathering IRS forms and deciphering a new tax code is one of the least appetizing ways to welcome life as newlyweds, especially if you just returned from Bora, Bora and unpacked those registry gifts. But the tax benefits of marriage (among many perks) *may* sweeten the deal. If you haven't already, it's time to roll up those sleeves or hire a CPA (certified public accountant) or service to do the heavy lifting on your behalf. Filing taxes married may lead to questions about marriage tax brackets, maximum tax breaks and more. Here's what to know about tax season as newlyweds.
In This Article:
- What to Know Before Filing Taxes Married
- Determining Your Marriage Tax Bracket
- The Benefits of Jointly Filing Taxes Married
- The Benefits of Separately Filing Taxes Married
- When to Consult an Expert for Filing Taxes Married
- How to Optimize Your Tax Refunds as a Married Couple
What to Know Before Filing Taxes Married
Spring isn't only a time to welcome Daylight Savings. For US couples, it's also tax season: a period where you'll either have to crunch the numbers yourselves or hire a CPA or digital service to report your earnings for the previous year. While most will have experienced this separately, newlyweds will be facing a first when filing taxes married. It may lead to questions about marriage tax brackets, maximum tax breaks, whether to even file jointly, and more. Here's what to know first.
Submitting a Form W-4
A big housekeeping item is filing a new Form W-4 after the wedding. This is the tax form you received from your employer so they can withhold the correct federal income tax from your salary. According to the IRS, newly-married couples "must give their employers a new Form W-4, Employee's Withholding Allowance within 10 days." With it, you can claim additional allowances and change your withholding rate to "married"—which means you'll get a larger paycheck every month.
Name and Address Changes
You may have also changed your name after marriage, in which case you must report this to the IRS (Internal Revenue Service). Discrepancies between your updated name and what the agency has on file could disrupt your tax return. The best way to notify the IRS is by updating your Social Security card. This also applies to a change of address, which requires that the US Postal Service be notified in forwarding of mail service (which can be done online) and by sending the IRS Form 8822, Change of Address.
The Best Time to File Taxes
Word of advice: Don't delay the process. The optimal timing for filing taxes, for everyone, is sooner than later in the season. Prepping in advance will alleviate any pressure, especially if you need to work through the differences in filing separately or together.
"It's complicated and requires a little bit of attention beyond just saying, 'Okay, we've got to do our taxes and get started over the weekend,'" says Jeff Motske, president and CEO of Trilogy Financial Services and author of The Couple's Guide to Financial Compatibility. "Keep both an electronic file and a paper file and continue to look at them [and] put things in there, but don't wait until April. Open it up in [the New Year] when you start [receiving] important information [like your W-2 forms, for example]."
Determining Your Marriage Tax Bracket
It helps to know your marriage tax bracket, whatever that may be. You have two filing options after the wedding: jointly or separately. "Married filing jointly" tax brackets apply to your combined income, while "married filing separately" tax brackets apply to your income. Which you select depends on your specific circumstance—more on that below. Knowing your bracket(s) helps you understand the rate at which you're both taxed. That can influence financial planning and make tax return surprises (such as owing extra money) less likely.
Experts suggest preparing the tax returns both ways to work through calculations. From there, couples can work through whether to file jointly or separately. Most services provide an automated option for couples to easily discover their best filing status.
We've also told you before how crucial it is to have money conversations before getting married, and this continues long after you exchange rings and vows. Motske also recommends scheduling a monthly financial date night so you're consistently on the same page. "If there's one thing I'd encourage all couples to do, it would be to be transparent about their money and determine what their budget is," he says. "Once they figure that out, they can figure out the tax aspect of it as well. Taxes need to be calculated into your budget too."
It's easy to find your married tax bracket. Check out this handy H&R Block tax bracket guide, which shares the most recent federal tax brackets and explains how they work. Or use TurboTax's tax bracket calculator.
The Benefits of Jointly Filing Taxes Married
The tax benefits of marriage depend on how you file. "Most [married couples] file together, and in most cases, filing jointly works better than filing separately—but everybody's scenario is case by case," Motske says. Filing jointly basically means you're sharing tax liability, and in turn, submitting one tax return together. But what exactly are the tax benefits of marriage if you file together?
The Highest Standard Tax Deduction
First off, married couples filing jointly qualify for the highest standard tax deduction. According to TurboTax's guide to filing jointly or separately, they're often eligible for extra tax credits too. (The same service notes that married filing separately taxpayers only receive a standard deduction of $13,850, as opposed to $27,700 for those who filed jointly.)
Because of the way "married filing jointly" tax brackets are structured, you may get a "marriage bonus." If one spouse's income is more than the other's and they file jointly, the higher earner could potentially owe the government less than if they filed separately. Essentially, their partner's income may lower their tax bracket. Of course, it goes the other way too—that could increase the lower earner's tax rate. Do some math to determine what would happen in your specific situation.
Gift Taxes
One of the greatest benefits of filing jointly in marriage just happens to be a love language. Doing so allows one spouse to give the other unlimited gifts in cash or property–free of traditional gift taxes. It's worth noting this applies only to US citizens.
IRA Benefits
Here's another perk for couples who individually hit the annual contribution threshold for their IRA. While the limit is $6,500 per filing year, married couples filing jointly can each hit the limit, even with one income. In short, a married couple could contribute up to $13,000 across two IRAs. That number can increase to $15,000 ($7,500 per person) if they're over 50 (with the catch-up IRA contribution).
Estate Protection
Succession isn't the only place where you'll come across estate and gift tax exemptions. As couples talk through estate planning, there's an unlimited marital deduction that can help protect the estate in the case of death. Under federal law, one party can leave assets to the surviving spouse without being taxed.
Saving Time
This goes without saying, but filing together could save some time over, say, filing twice individually. Consulting with an expert, if necessary, can also ultimately save money and valuable time, especially if both parties tune into the nuances of ways to maximize their tax benefits.
Higher Charitable Deductions
Opening those pocketbooks (both physical and digital) doesn't only help others. Donating cash can result in a deduction, allowing you to lower your taxable income.
The Benefits of Separately Filing Taxes Married
Can married couples file taxes separately? Yes. You'll want to weigh the pros and cons of what works best for you within your respective brackets. These are just a few of the possible tax benefits of marriage if you file separately.
Avoiding Tax Liability
Did you know that if your spouse messes up a figure, you're equally liable for those numbers… what can come from filing misleading returns? "One benefit of filing separate tax returns would be tax liability—in other words, filing separately so you don't assume someone else's tax liability right away," Motske says. "So, if one of you has had some problems in the past, you might want to be careful there—that's why transparency and understanding what goes on with your partner's finances is so important."
Avoiding the Marriage Tax Penalty
There's also the possibility of what's called a "marriage tax penalty"—infrequently, filing jointly can put you both in a higher tax bracket than if you filed separately. (This only happens if both spouses were originally in one of the higher tax brackets. It's also worth noting: the top tax rate is 37% for those with incomes beyond $609,350 or $731,200 for joint-filing taxpayers.) One of the reasons this takes place is because the married filing jointly (MFJ) income tax brackets aren't equal to twice the single income tax bracket.
Filing Due to Out-of-Pocket Medical Expenses
The time when filing separately may benefit both parties if one person has a large number of medical expenses paid for out-of-pocket. In these instances, that individual may be able to more easily qualify for medical deductions as it requires passing the 7.5% barrier of the adjusted gross income, as opposed to filing jointly.
When to Consult an Expert for Filing Taxes Married
When it comes to questions and confusion over your tax return—which can become even more complicated once you're married—hiring a pro to walk you through the process is worth it. "I always encourage people to see professionals. Just like you'd go to the doctor or dentist—the same goes when it comes to your finances and taxes. Especially after a big expense like a wedding, [newlyweds] are just burnt out financially by the time tax season comes around, and they're not quite ready to go back into that space," Motske says. "That's where I think a professional can come in and be unbiased and make the process as painless as possible. Seeing someone who's able to answer your questions, run your scenarios multiple different ways and know the tax codes better than software is so valuable."
That said, even online tax filing comes with an in-person aspect nowadays. If you use TurboTax or H&R Block, for example, you can still request help from experts through live chats or one-on-one sessions that should be scheduled in advance. TurboTax even offers line-by-line tax return reviews with a CPA or EA.
How to Optimize Your Tax Refunds as a Married Couple
So you've gotten through tax season and you wound up with a refund. Now you have to decide how to use it together. "I always advise people to put it to work for them," says Motske. "Make sure you're putting those tax savings somewhere meaningful, whether it's [saving up to] buy a house or pay off some debt." Allocating your funds with intention and care is one massive leap toward financial wellbeing in your relationship.
Motske also advises couples to stop thinking about their refunds like a big bonus or a gift—you know, like your vacation or shopping money. "If you're getting a massive refund, that's a huge mistake," he says. It could mean you're overpaying on taxes throughout the year, which isn't a very beneficial use of your hard-earned cash. "You should be getting that money in your paycheck every single month and putting it to work [saving for retirement, building an emergency fund or paying down debt], instead of letting the government earn interest on it before getting it back."
Emily Platt and Maggie Seaver contributed to the reporting of this article.
Please note: The Knot and the materials and information it contains are not intended to, and do not constitute, financial or tax advice and should not be used as such. You should always consult with your financial and tax advisors about your specific circumstances. This information contained herein is not necessarily exhaustive, complete, accurate or up to date and we undertake no responsibility to update. In addition, we do not take responsibility for information contained in any external links, over which we have no control.