Understand Your New Filing Status Options

Taxes probably weren’t at the top of your mind as you said, “I do,” but now that you’ve tied the knot, your financial life has changed, including your tax situation. Updating your filing status may have some unexpected impacts, so it’s essential to get ahead of understanding your new status before you sit down to file your next tax return.

Once you get married, you can no longer use the Single filing status (your marital status on December 31st each year determines your status for the entire year for tax purposes). General tax law allows a married couple to file their federal income tax returns either jointly or separately.

Which filing status is best for you may depend on your circumstances.

For most married couples, filing as Married Filing Jointly will result in a lower tax liability due to a higher standard deduction. However, you can also choose to file as Married Filing Separately and report only your income, credits, and deductions.

The second option may be advisable if:

  • Either you or your spouse has messy or missing records or is taking a risky tax position, or if the IRS suspects you or your spouse of not reporting all income.
  • You, your spouse, or both have federal student loans and are on income-driven repayment plans. When you file separately in these circumstances, generally, the Department of Education will only use one spouse’s income, rather than combined income, to calculate the repayment plan, which can result in more affordable payments.
  • Either you or your spouse has not been filing tax returns.
  • Both you and your spouse have your own itemized deductions. Filing separately may allow some people to claim higher overall deductions in these circumstances.
  • Either you or your spouse has past-due debt from a government agency.

To determine which filing status is best for your circumstances, it’s a good idea to consult a tax professional (such as Rosenberg & Chesnov) or use the IRS Interactive Tax Assistant.

Check Your Withholding

If you and your spouse work, remember that your combined income may place you in a higher tax bracket. The IRS Tax Withholding Estimator can help you determine whether you need to give your employers a new Form W-4.

Notify Government and Financial Institutions

Often, marriage also involves a change of name and/or address for one or both spouses. To ensure you receive all necessary documents and notices, the IRS accepts your tax return without issue, and that you avoid any possible penalties or fees that can result from late or incorrect filing, it’s essential to make sure all government and financial institutions, as well as your employer, are aware of the change.

If you or your spouse, or both, have taken on a new name, you’ll need to report this to the Social Security Administration (SSA). The IRS will cross-reference the information you provide on your tax return with SSA records. If the records don’t match, any electronically filed return will be rejected, and any paper-filed return will be delayed.

It’s also a good idea to avoid making a name change too close to tax season, as the delay in data-sharing between the SSA and IRS can cause problems. If your marriage occurs near the end of the tax year, it may be good to file your return using your unmarried name and change your name with the SSA after you file your return.

You should notify the IRS and the U.S. Postal service of your new address if you move. The IRS will automatically update your address when you file your next return. Still, any notices they send in the meantime may not get to you, as the U.S. Postal Service does not forward certain types of federal IRS mail, often including refund checks.

Selecting an electronic deposit for your refund is an excellent way to avoid delays and mix-ups due to your change of address.

Likewise, to make sure your mail, including mail from the IRS, gets forwarded to your new address, you’ll need to submit a forwarding request online or at your local post office.

You should also notify your employer of your name or address change to make sure they can send you your Form W-2. You’ll also need to notify any financial institutions you do business with, including banks, brokerage firms, and employer-sponsored retirement plans, to ensure they send any Forms 1099 to the proper address.

Finally, if you are receiving advance payments of the Premium Tax Credit, you should report changes in circumstances to your Health Insurance Marketplace. Changes to your household, income and family size may affect the amount of the credit you qualify for.

Utilize Common Tax Credits and Deductions

Taking advantage of applicable tax credits and deductions are a common and effective way to reduce taxes for many taxpayers.

A tax credit reduces the amount of taxes you owe, while a deduction lowers your overall taxable income (thus lowering your liability). Generally, a tax credit is worth more than a deduction in a dollar-for-dollar sense, but both can be powerful tools for lowering your tax bill.

The higher standard deduction for filing with the Married Filing Jointly status mentioned above is one of the most beneficial tax advantages to getting married for most couples. (Although, as also discussed above, there are exceptions.)

Additionally, spousal IRA contributions or a contribution to an Individual Retirement Account based on your spouse’s income rather than your own can yield further deductions — which double if you and your spouse both contribute to the same IRA.

A married couple may also be able to take advantage of higher charitable contribution deductions. Being married often means a higher combined income level, which can raise the annual limit of deductions you can claim for your donations.

Depending on your financial circumstances, you and your spouse may also be able to benefit from the Earned Income Tax Credit (EITC), which helps low- to moderate-income workers and families get a tax break. If you qualify, you can use the credit to reduce the taxes you owe – and maybe increase your refund.

Finally, estate tax deductions can also provide substantial benefits for high-net-worth individuals, although these are highly complex and less common.

Other standard deductions you can use to lower your tax liability, if you qualify, include:

  • Work-related expenses
  • Child-care costs
  • Charitable travel costs
  • Energy-saving home improvements
  • Pregnancy testing
  • Student loan interest
  • Qualifying medical expenses
  • Moving expenses
  • Property and real estate tax
  • Home mortgage interest
  • And more!

A tax professional can help you understand which deductions and credits apply to your circumstances and how to take advantage of them to lower your liability at tax time.

Would you like some help?

If you are a client and would like to book a consultation, call us at +1 (212) 382-3939 or contact us here to set up a time.

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