February 6, 2024

HOL-Life: Part 2

Tax Tips for Newlyweds

You have just said "I Do" and the first tax season after getting married is drawing near - Understanding how your tax situation alters after tying the knot is crucial for making informed financial decisions as a couple. One of the most immediate changes after marriage is the option to file taxes, either married filing jointly or married filing separately.

 

Filing Options

When you get married, you have the choice to file jointly with your spouse or separately. Filing jointly often brings tax benefits, such as potentially lower tax rates and a higher standard deduction compared to filing as single or married filing separately. In 2023, Married Filing Separately taxpayers only receive a Standard Deduction of $13,850 compared to the $27,700 offered to those who filed jointly.

 

Deductions and Credits

Depending on your individual incomes, combining them as a married couple might place you in a different tax bracket compared to when you were single, and either increase or decrease your tax liability. Additionally, married couples might be eligible for various deductions and credits that were unavailable to them individually. Common deductions like mortgage interest deduction, charitable contribution deductions, and education-related credits can change in value or eligibility after marriage.

 

Updating Your Tax Withholdings

It's essential to update your tax withholdings with your employer after getting married. Updating your W-4 form ensures that the appropriate amount of taxes is withheld from your combined income. When filing jointly, both partners are legally responsible for the accuracy of the tax return and any taxes owed. It's important to ensure that both parties are aware of and comfortable with the information reported. Sometimes, marriage tax situations can result in what's known as a "marriage penalty" or "marriage bonus." A marriage penalty occurs when a couple's combined tax liability is higher than if they were to remain single and file separately. Conversely, a marriage bonus occurs when a couple's combined tax liability is lower compared to their individual tax liabilities when single.

 

Deciding what is best for you and your partner can be difficult. Please remember that tax laws and codes tend to change annually. Stay updated to ensure compliance and take advantage of any new opportunities or adjustments. Keeping up of these changes can help make tax season smoother and more beneficial for you or your business. If you are already a client, please reach out to your current contact and we will discuss this topic further with you. If you are not an existing client, please call 724.934.4880 and we will be happy to discuss your situation further to determine how we can best help.

Article written by Caroline Ratchford

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