Your vows aren’t gonna include the words Till death and taxes do us part, when you walk down the aisle.
Because once you tie the knot, including that clause may not be such a bad idea, your tax situation has the potential to go from simple to complex fast not to mention the fact that you’ll have to reconcile any disparate tax strategies.
For instance, Melissa and Lee Bernhoft, ‘Houstonbased’ newlyweds who got married in April, have two very different attitudes toward declaring exemptions. While Lee prefers fewer, melissa likes to declare more. Let me ask you something. The one of the concerns they can agree on, am I correct? For the first time ever, they’re going to use an accountant to help them file and navigate their new tax situation.
Chances are you’re also confused by the uncharted tax territory that lies ahead, if you’re newly wed like the Bernhofts.
With less than two months to go until the filing deadline, a good place to start would be simply to understand what’s different now that two incomes have become one. On top of this, we asked a few tax professionals to outline most of the most significant changes that happen once you go from single to married. Known there’re four major differences to consider before you file.
You’ve kissed the single life goodbye, that also means kissing goodbye your single filing status you must now file as either married filing jointly or married filing separately. For most couples’ tax situations, married filing jointly will likely make the most sense. Not only could you enjoy a lower federal tax rate than when you were single, you’ll also be able to take advantage of tax breaks like the earned income credit and various educational deductions and credits that aren’t available to couples who file separately, says Lisa Greene Lewis, a CPA and TurboTax expert based in San Diego.
Like owing a lot in back taxes, the likeliest reason to choose a married filing separately status would be if you feel one of you is at risk for an audit or has tax baggage, says Andrew Poulos, a ‘greater Atlanta based’ tax accountant and principal of Poulos Accounting Consulting.
Filing separately will help provide some protection from tax liability for the other spouse. Filing as ‘married joint’ allows the IRS to offset any refund from their joint return against the prior collection balance owed by amidst the spouses, he says, if one spouse has a balance owed to the IRS from prior years. Ok, and now one of the most important parts. The overarching rule to remember, am I correct? Certainly, the minute a couple signs a tax return as ‘married joint,’ it doesn’t matter whose money share creates any sort of liability both spouses are equally liable for the full amount even if they are divorced at some point in time, Poulos adds.
RELATED. Tax Time. Should a Married Couple Ever File Separately, this is the case right? Nevertheless, for better or for worse, as a newly married couple you’ll likely be entering a new tax bracket together. Whether or not that works in your favor depends on your individual situation. The more likely you’ll be able to lower your tax burden. This is sometimes referred to as the marriage bonus.
If your income is 70000 household income now pushes you both down into the 15 tax bracket.
And particularly if you’re high earners, you’re more going to experience the marriage penalty having a higher tax burden than you would have had if you were filing as single, if you both earn similar incomes. Although, adding two high, equal incomes together could easily push a married couple’s income into a higher tax bracket, that results in a ‘penalty,’ Poulos says.
Now look, a couple earning, For 2015 taxes, the standard deduction for single filers is. Since if one spouse claims itemized deductions, just keep in mind that if you’re married filing separately, deductions can get a little tricky, the other spouse has to claim itemized deductions even if they don’t have any and both spouses can’t claim the same itemized deductions, Poulos says. You will have to decide as a couple who gets to claim which deduction on your separate 1040s.
Additionally, couples who make over each in No. Ultimately, they may end up paying more in taxes to make up for what they didn’t pay while they were in their lower, ‘singleperson’ tax bracket. Although, that said, most married couples tend to fall on fitting side into lower tax rates at higher combined incomes, says GreeneLewis. There’s still the higher standard deduction and being eligible for additional tax deductions and credits you may not have beenableto take in the past. Generally speaking,all of these factors allow a couple that files ‘married filing jointly’ to have lower tax liability, she says.