Scott Estill – 4-22-2014
2014 Tax Tips for Newlyweds
- For tax purposes, your marital status is determined as of December 31, 2014. As such, it is possible to time the marriage to produce the lowest possible tax results (i.e. should we marry in 2014 or 2015).
- If either spouse changed his/her name as a result of the marriage, make sure the name(s) has been changed at the Social Security Administration (Form SS-5) and the name matches the name used on your first tax return as a married person.
- Married couples are permitted to file their taxes one of two ways: married filing jointly or married filing separately. While a joint filing status is usually best of most couples in that it will result in the least amount of taxes being paid, it doesn’t hurt to compute the taxes with each filing status to see which produces the lowest tax bill in your particular situation. You are permitted to change your filing status in the future so any decisions for 2014 are not binding on future tax years.
- If either spouse has a current tax issue pending from prior to the marriage, the couple should consider filing separately, especially if tax refunds are at issue and one spouse has no legal liability for the debts of the other spouse.
- For same-sex couples, the IRS will view you as legally married for federal tax purposes. Thus, a joint or separate filing status will need to be determined for federal tax purposes. However, there is still uncertainty for same-sex married couples who live in a state that does not recognize their marriage. If this is the case, it may be necessary to file as married at the federal level and single at the state level.
- It may be easier for you and your spouse to itemize tax deductions after marriage given that you both can combine your deductions if you file a joint tax return. These deductions include charitable donations, state and local taxes, mortgage interest, investment expenses, unreimbursed employee business expenses and many other possible expense deductions.
- It is important to review your income tax withholdings at your W-2 job. In some instances, it may be beneficial to claim an extra exemption for income tax withholding purposes (for your new spouse), resulting in less taxes being withheld and a pay increase to you! You should use this strategy only if you anticipate a tax refund at the end of the year. If you owe taxes, you may be liable for additional interest and/or penalties if you are under-withheld in the tax department.
- You should also review retirement the plan options for both spouses, as in some instances contributions to a Roth IRA or other tax-favored plan may now be available to newly-married couples.
- For couples who each owned a personal residence before the marriage, there may be some tax breaks available when selling one of the homes. For instance, if a home is sold as a result of combining two households, newlyweds may be able to exclude some or all of the capital gains. If the seller owned and used the home as a main residence for at least two of the past five years before selling it, he or she can exclude $250,000 of capital gains. Once married, the amount doubles to $500,000 if the couple files jointly and meets certain ownership and use tests. This is one area in which a small amount of tax planning can reap very large financial rewards via tax savings.
- If one or both spouses change addresses following the marriage, it is important to file a change of address (Form 8822) with the IRS so that you are kept aware of any notices, refund checks or other tax matters.