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Tax tips for newlyweds
Summer is traditionally a time when couples tie the knot and, as is the case with so many major milestones in life, all newlyweds should be aware of the tax considerations associated with marriage. If you or a loved one is planning nuptials, the Minnesota Society of CPAs offers this advice on addressing the tax concerns.
Spread the news
If you or your spouse changes your name, be sure to report it to the Social Security Administration so that your new name matches your Social Security number when you file your next tax return. You can find Form SS-5, “Application for a Social Security Card,” at www.ssa.gov, your local SSA office or you can get one in the mail by calling 800-772-1213. Also let your employer know of any name change. If you move after you get married, be sure to update your address with your employer and the Internal Revenue Service.
Decide how to file
Once you are married, you and your spouse have a choice between filing your taxes jointly or separately. Filing jointly is usually the best choice because it allows you to take advantage of some significant deductions and credits that aren’t available to those who file separately. You may still consider filing separately, however, if it’s beneficial for you to keep your income separate for alimony or child support purposes or if it will enable you to qualify for medical expense or other deductions that are based on a percentage of your income.
Update your status
Consult your CPA or use the IRS Withholding Calculator at www.irs.gov to decide whether you should change your withholding amount on your W-4 based on your new combined income. In addition, give some thought to the best form to use when you next file your tax return. You may have been filing a Form 1040EZ or 1040A as a single person, but a change in your marital status may mean financial changes that qualify you for more deductions by itemizing using a Form 1040.
Line up your deductions
Did you buy a new home when you got married? If so, find out about deducting any points you paid on the mortgage and consider how your mortgage interest, real estate tax and other deductions will affect your tax and overall financial situation. In addition, if you donate some unneeded personal or household goods to charity when you combine your households, make sure to get a receipt so that you can deduct their fair market value when you file your tax return.
Review your retirement planning
Now that you’re married, consider starting or pumping up contributions to a tax-advantaged retirement account. This is particularly important if your employer offers matching contributions for a company-sponsored 401(k) or other retirement plan. The employer match is basically a free bonus, so it’s best to make the most of it.
Any money you can put aside now has the potential to earn income and dividends over the years ahead and will become a nice nest egg when you’re ready to retire. While you’re at it, be sure to change the beneficiary on your life insurance plans if appropriate. This is also a good time for you and your spouse to make or revise wills that set forth exactly who should inherit your money and other property.
Consult your CPA
A wedding is a joyous event, but marriage can make your financial life slightly more complicated.Visit www.mncpa.org/referral to find a CPA in your area.