Getting Married and Filing Taxes 

sqa-banner-Married-Taxes

Loving couples have tied the knot left and right through November! Between the wedding planning and the excitement, we want to make sure couples aren’t forgetting about their financial planning. There is a difference between filing your taxes as single and when you file as married when you filing your tax return, but don’t worry! We have some advice for the happy brides and grooms to be on how to properly plan for your financial future with your partner.

It is important to check your financial compatibility with your partner and create a plan together. Have open conversations with your partner about finances and savings. The following are some big decisions you will have to make before you get married:

  1. Together or Separate?
    • Discuss how finances will or will not be mingled
      • Fully: Combine your checking, and savings accounts, share credit cards, and make payments out of joint accounts.
      • Somewhat: Separate personal accounts, a joint savings account or a family credit card with ground rules on how to handle household expenses (i.e.: rent, insurance, utilities, etc.)
  2. Decide on Roles
    • Discuss the division of financial labor
      • Typically there is one partner that takes on the role of the primary bookkeeper that makes sure all of the bills get paid on time and accounts aren’t overdrawn.
      • It is incredibly important to make sure both are informed.
        • Consider setting a monthly or quarterly date to meet to review your planned budget to see what has been going well, what has been going wrong, and what needs to be tweaked. This is also a great time to discuss any upcoming large expenses such as vacations, holidays and home repairs.
  3. Budget
    • Track your spending! Creating a budget together and sharing financial priorities will make your shared financial life more secure.
      • We suggest that you save 10% of your income and start an emergency fund for unexpected circumstances such as job loss or major necessary repairs on cars or homes. This also allows for an opportunity to invest in a retirement account.
        • When creating a savings account for this emergency fund, we also recommend that you open the account in a different bank than the one you use for your everyday spending in order to make immediate access less convenient.
      • Handle your debt together. Plan to pay down existing debt, but keep in mind that one taxpayer’s credit can be negatively affected by their spouse’s preexisting debt. This is why it is important to not keep financial secrets.
      • Plan for retirement early. Once your emergency fund has been built up to your satisfaction, begin to plan for retirement. Each partner should have their own account to save for their retirement.
  4. Housing and Transportation
    • We know that newlyweds are ready and excited to get their lives together up and running. Some may want to begin planning for a family while others may have different goals, but our advice on housing and transportation is the same for everyone.
      • Start with a small house. You probably do not need as much space as you would think. Starting in a small home or apartment will keep your bills lower and make life more affordable while still provide an opportunity to create your dream home.
      • You do not NEED a new car. Although you may want one, it is more economical to buy a later model used car than a top of the line brand new one. With a used car, the insurance and car payments will be far less, allowing a new couple to remain financially stable as they go through the process of sorting out their future.
  5. Filing Status
    • There are five filing statuses: 1)Single, 2) Married Filing Jointly, 3) Married Filing Single, 4) Head of Household, and 5) Qualifying Widow(er) with Dependent(s)
      • To file as single, the taxpayer must be unmarried, legally separated, or divorced on the last day of the tax year (December 31).
      • To file as married, the taxpayer must be legally married on or before the last day of the tax year (December 31).
        • If you can legally file as married, you MUST file as such, but can choose to file jointly or separately.
    • Married Filing Single Vs Jointly
      • Single: Allows the married taxpayers to file two separate returns similar to when they filed as Single.
      • Jointly: Allows the married taxpayers to file a single tax return with both of their information on it. This option saves time and money, however, each status affects the tax bracket, deductions, and credits allowed.
      • The clearest difference between filing single and married, jointly or separately, is the tax bracket changes. The minimum and maximum income changes in each bracket for married couples who file jointly while those who file separately have the same income requirements as those filing as single. Below is a chart to demonstrate.
Tax Rate Income Filing Separately Income Filing Jointly
10% Up to $9,525 Up to $19,050
12%/15% $9,526 – $38,700 $19,051 – $77,400
22%/25% $38,701 – $82,500 $77,401 – $165,000
24%/28% $82,501 – $157,500 $165,001 – $315,000
32%/33% $157,501 – $200,000 $315,001 – $400,000
35% $200,001 – $300,000 $400,001 – $600,000
37%/39.6% $300,001 and up $600,001 and up
      • There are also changes in deductions. The standard deduction in TY 2018 is $12,000 for single filers and for joint filers, it is $24,000. Single filers can deduct up to $3,000 of their capital gains losses from their income. Couples filing jointly, although there are two people filing, can also only deduct $3,000 in total.
      • It is important to check your withholding once the decision has been made to file separately or jointly. Filling out a W-4 form to distribute exemptions amongst a couple is different than for a single filer. For example. If one partner qualifies for three exemptions and their partner qualifies for one, the number of exemptions should add to four total between the two W-4 forms. Both partners should not take four exemptions each as this will result in owing money to the IRS when they file together. Sorting out exemptions as a jointly filing couple can be made easy by using the withholding and marriage calculators. For the most up to date information about withholdings, see our blog post about it here.

6. Consult a CPA

    • It is always a good idea to get expert advice when it comes to your finances, whether you are single, engaged to be married, or already married. Professional help will enable you to obtain your goals and make educated financial decisions about your future.

We at Mazur & Associates offer custom professional advice for our clients based on the information they provide about their particular situation. We highly recommend that if you are seeking a personalized tax plan that you call us at (732) 936-1230 to set up an appointment with one of our CPAs or tax professionals so that we can get you set up for a successful and worry-free financial future. We are eager to help!

Congratulations to all of the newly wedded couples and to those who have spent years of happiness together thus far, we wish you many more!

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