Once upon a time you fell in love. Your love grew and grew and now the only left to do is tie the knot. Everything is rosy and nothing will ever go wrong. But then comes the tax season. What, you thought this about divorce?
Yes, divorce will affect your taxes, too, but do you know how much things will change after you get married?
What You Don’t Know Can Hurt You
If you’re getting ready to get married, or recently got married, then don’t go into it blindly when it comes to taxes. There are some important things to know. And what you don’t know about marriage and taxes CAN hurt you. For starters, did you know that about 7 percent of the total federal income tax collected is from married adults? So, if you haven’t looked into how your taxes will change after marriage, it’s time you do.
The first thing you need to look at is your filing status. It will change, even if you file separately from your spouse. You can choose Head of Household, Married Filing Jointly, Married Filing Separately, and Qualifying Widow or Widower with Dependent Children. Here’s one example of how changing your filing status will affect your taxes. The standard deduction for a single filer is $12,000 for 2018. For someone choosing the married filing jointly status their standard deduction doubles to $24,000.
Joint or Separate?
That brings us to the question, which is better: jointly or separately? While most couples do file jointly, unfortunately, there is no one set answer. If there were, there wouldn’t be two options. How you choose to file depends on several factors, including your incomes, your deductions and your credits.The advantages to filing jointly include a higher standard deduction, as well as higher tax thresholds for certain tax breaks. You could also claim two exemptions now that you are married.
You Both Own the Return
One other thing to keep in mind when you file jointly is that you are both responsible for the information on your tax return, whether you both actively participate in the filing process or not. So, if you don’t completely trust your spouse’s financial dealings, then filing separately might be the best option for you.Another situation in which filing separately might make sense is if one spouse has a lot of deductible medical expenses. That’s because with a higher adjusted gross income it’s harder to reach the deduction threshold.
New Tax Bracket Numbers
Another difference to be aware of when you get married is that your taxbracketwill change. You will move from the single tax bracket to one of the married brackets, which have thresholds that are double the amount of the Single filer brackets.
Does Itemizing Make Sense?
What about itemizing? Now that you’re married, itemizing deductions might make more sense. Of course, with the new increased standard deductions now in place under the new tax law, it might not matter. But,as a couple you might have more deductions. And they could amount to more than the standard deduction, which means a bigger tax break for you and your spouse.
As with any tax decision, there are several factors to consider,and no two taxsituations are exactly the same. So, it pays to look at all your options and choose the one that works best for you. After all, you don’t want you’re marital bliss to get ruined by taxes.
The post Ready for Taxes After Marriage? Here’s What You Need to Know first appeared on Advisors to the Ultra-Affluent – Groco.