NewlyWeds and their Newly Discovered Tax Situation
By Alan L. Olsen, CPA, MBA (tax)
Greenstein, Rogoff, Olsen and Co., LLP
Are you a newlywed? Wedding planning usually takes months of pouring over details such as choosing a venue, creating an attendee list and picking the right dress. After the big day comes and goes, couples find themselves beginning their new life together. However, many do not consider the tax implications of marriage. At the end of every year, December 31st determines your marital status in the tax books. That means that whether you were married on January 1st of that year or December 31st, the government considers you married for the entire year. Make sure that you plan properly so that you can receive appropriate tax benefits as a newlywed.
Determine what filing status is best for you.
As a newly married couple, there are a few options that you can choose from when filing your taxes. Your tax filing status can be married, filing jointly or married, filing separately. In deciding what filing status is best for you, consider the following:
1. Married, Filing Jointly-If you choose this option, you and your spouse will have a combined income on your tax return. All of your deductions and credits will be based upon your joint income. Since husband and wife are both responsible for the tax return, both must sign it.
2. Married, Filing Separately-With this option, each spouse files and signs their own tax return based upon their own income. If one spouse chooses to itemize deductions, the other spouse must itemize too. Likewise, if one chooses to take the standard deduction, the other spouse must take this deduction as well. Also, for married, filing separately, the tax rate is generally higher than married, filing jointly. However, married couples may prefer this option as husband and wife are only responsible for their separate tax returns that they file.
Usually, the status of married filing jointly has more tax benefits than married, filing separately. For example, with your filing status as married, filing jointly, you may qualify for credits and deductions such as:
-Child Care Credit
-Lifetime Learning Credit
-Earned Income Credit
You cannot qualify for the above credits if your filing status is married, filing separately.
With all of your wedding preparation, it would be wise to consider tax planning as well, so that you can choose the best tax benefits for you and your new spouse.