Is This Your First Tax Season as Newlyweds? Here’s How to Get Through It Like Pros
’Tis the season—for taxes. Listen, we know shuffling through IRS forms and deciphering a new tax code is one of the least enticing ways to kick off newlywed life (especially if you just returned from your honeymoon and finally wrapped up thank-you notes). But if you haven’t already, it’s time to get down to business filing your first tax return as a married couple. Have questions? We have answers, thanks to Jeff Motske, president and CEO of Trilogy Financial and author of The Couple's Guide to Financial Compatibility. Here’s what first-time newlyweds need to know this tax season.
One of the biggest mistakes people make, according to Motske, is procrastinating. “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,’” he says. “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 10. Open it up in January when you start [receiving] important information [like your W-2 forms, for example].”
We’ve told you before how crucial it is to have the money talk before getting married, and this continues long after you exchange rings and vows. Motske 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.”
Based on your circumstances, know the benefits of filing jointly…
“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 together immediately allows you to claim a $500 tax credit, whereas if you file separately, you don’t get that benefit. That’s just a core money aspect of it.” Married couples filing jointly also qualify for the highest standard deduction and can claim two personal exemptions (as opposed to only one allowed you individually, before you tied the knot), whereas those credits and deductions won’t apply (or be as beneficial) to those filing separately.
“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. So, if one of you has had some problems in the past, you might want to be careful there—that’s where transparency and understanding what goes on with your partner’s finances is so important,” Motske says.
He also brings up phaseouts, where an individual who earns over a certain amount of money isn’t allowed to claim some deductions or personal exemptions. However, if you file separately when one of you doesn’t hit the phaseout individually, you could potentially get those deductions. “Particularly on retirement plans, if one of you doesn’t make as much as the other, it might be advantageous to file separately so one of you would be able to get a deduction on, say, their IRA,” he says.
“A final reason you might consider filing individually would be if you came into the relationship owning some income property or other assets where you might benefit from keeping it separate for tax losses,” Motske says.
Talk to an expert.
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 will always be worth it and far outweigh the costs. “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.”
Rethink your refund.
Another big change with the new tax law? “Everybody got a little bit of a tax break,” Motske says. “I always advise people to put it to work for them. Make sure you’re putting those tax savings somewhere meaningful, whether it’s [saving up to] buy a house or pay off some debt.”
Motske also advises couples to stop thinking about their refund 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, since it means 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.”
Once you’re married, file a new Form W-4 with your updated newlywed status (this is the tax form you received from your employer so they can withhold the correct federal income tax from your salary). That way you can claim an additional allowance and change your withholding rate to “married”—which means you'll get a larger paycheck every month.