10 things newlyweds should consider while filing their tax returns
Congratulations on officially beginning a new chapter in your life. We’re sure you and your partner are ready to embark on an exciting journey of togetherness and happiness.
You’re now together in life’s ups and downs. You need to make new arrangements and compromises. Your commitment extends beyond companionship to finances too.
Inevitably, there’ll be decisions around financial planning in this new phase of your life.
Would this affect the way you tackle taxes too? Let’s see which factors affect your taxes that follow your happily ever after.
1. File your taxes through the right form
As a bachelor, you must be filing your taxes claiming some basic deductions under Form 1040A or 1040EZ. But these forms don’t include itemized deductions.
Now that you’re married, you have the opportunity to claim deductions for medical expenses, interest on mortgage, and many other miscellaneous costs. Under the federal income tax law, these deductions are allowed only if they’re itemized. That’s why you need to file your return claiming deduction under Form 1040 instead. Make sure you obtain the right form for filing your taxes.
2. Notify tax office about name change
Many couples decide that one or both partners changes their name after marriage. This is completely their personal decision and the law doesn’t treat any couple differently.
But it is important that you and your spouse are filing your income tax returns under the correct name and identification number as appearing in the records of the IRS Office. In case you’ve decided to change names, get the change registered and updated with the Social Security Administration at the earliest. You’ll get an updated Social Security Card officially registering the change.
3. Notify regarding change of address
Quite obviously, either you or your spouse, or both partners would be moving to a new residence post marriage. In case of change of address, you need to notify the IRS timely. This is important to facilitate correspondence from the IRS office regarding your taxes. Besides, if your address is not correct, your tax refund check is bound to be returned as undeliverable.
4. Consider prior debts
When you or your spouse have some past dues like child support payments, loan repayments or tax liabilities, you need to carefully consider the position before filing the taxes. You wouldn’t want one spouse to bear the penalty of another partner’s past dues.
In order to safeguard the interests of the partner who doesn’t have the liability, you can choose to file your return separately. If you prefer filing the income tax return jointly, the other partner should file an Injured Spouse Allocation Form.
5. Deductions allowed in joint returns
If you file tax returns jointly as a couple, you can take advantage of standard deductions. This is crucial for smart tax planning, since the couple can jointly claim deductions, even if one of the spouses is not earning. The spouse without an income becomes eligible for an Individual Retirement Account, and access benefits entitled to married couples exclusively.
In addition to this, employers usually announce benefits for married couples and employees with family and most of these can be claimed as deductions.
6. Risks of joint returns
Filing a joint return after marriage comes with a small baggage too. Filing taxes becomes the joint responsibility of the spouses. The couple is jointly liable for any errors or misrepresentation committed in filing returns. The liability will extend even if you end up separating or divorced.
7. Consider filing separate returns
Filing income tax returns separately may be a better option for some couples. You need to factor in the pros and cons of joint filing and arrive at a decision.
We’ve already discussed a few scenarios where joint filing may prove to be challenging for the couple. Filing jointly makes more sense if you have significant expenses on medical bills or business operations.
There are some complex tax rules around marital and community properties in some states like Arizona, California and New Mexico. Take advice from a tax lawyer to understand which income tax filing option makes more sense for your position according to laws applicable in your state.
8. Estate protection laws for married couples
Law protects the rights of the surviving spouse in case of death of his/her partner. As such the estate of the deceased person is inherited by the surviving partner without the need for paying any estate tax. These laws should be considered while planning your taxes and investment decisions.
9. Buying your new home
When you purchase a new home as a married couple with your combined income, the ownership is shared. And so is the tax-deductible mortgage interest. At the time of sale of the house property, the gain on tax can also get included from your joint income.
10. Tax credits for dependent children
The law allows a tax credit for every dependent child. The child may be from a previous relationship or the biological or adopted child of the married couple.