Tax tips for newly married couples

Tax tips for newlyweds

Your marital status may change your filing status, the income you report, and the deductions you can claim.

Filing status and options

Marital status and filing status are two different things. Your marital status—single, married, separated, divorced, or widowed—is an official relationship status recognized by your local government.

While related to marital status, your filing status is how you tell the IRS which:

• Standard deduction amount,
• Credits,
• Filing requirements, and
• Tax rate schedule/table

you are eligible for so you can pay the right amount of taxes.

Once you’re married, your marital status and your filing status both change. You must now choose “Married Filing Jointly,” or “Married Filing Separately.” 

What are the filing statuses?

There are five filing statuses for taxpayers: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Surviving Spouse. Below, we explore the differences and benefits of the two options for married taxpayers: Married Filing Separately and Married Filing Jointly.

What’s the difference between filing jointly and filing separately?

Marital status is determined by whether you’re married on the last day of the calendar year, but you don’t have to live with your spouse to file using either status. The most common filing status for married couples is Married Filing Jointly, where married couples file a single tax return together.

If you file as Married Filing Jointly, you’ll receive the largest standard deduction and have a higher maximum income amount for the phase out of many tax benefits. You’ll also have the lowest overall taxes on your income.

But also keep in mind that if you and your spouse file as Married Filing Jointly, you are both responsible for the taxes owed that tax year and cannot amend a joint return to two separate returns once April 15 of the filing year has passed.

What about Married Filing Separately?

Married Filing Separately means each person claims their own income and deductions on their own separate tax returns. It means only the individual on the tax return is liable to the IRS for any tax bills and errors on the return.

This filing status has the highest taxes, least allowed credits and deductions, and can make more of the income taxable in many circumstances, such as Social Security benefits.

If you file as Married Filing Separately, the standard deduction is five dollars for one spouse when the other itemizes their deductions. If you file separately, you can later amend to file a joint return for up to three years past the due date of the tax return. Prepare your taxes both ways to see which filing status is better for you before officially filing your taxes.

Reasons for filing separately

If you choose to file as Married Filing Separately instead of Married Filing Jointly, you may benefit if it results in less tax owed (when the taxes are combined) than if you file a joint tax return. You can also use this status if you and your spouse want to be responsible only for your own income tax.

If you and your spouse don’t file jointly, you still must file your income taxes and file as Married Filing Separately, unless you qualify for Head of Household status.

This status may also work well for those married to a spouse who paid out of pocket for big medical expenses and filing jointly makes your standard deduction too high to qualify for itemized deductions.

It’s important to note that community property states have special rules concerning the division of marital income. If you live in one of these states, filing separate returns may not be as easy and straightforward.

When do I have to use the Married Filing Separately filing status?

You must use the Married Filing Separately Filing Status if you are:

• Married as of midnight December 31 of a tax year and,
• Your spouse refuses to file a joint return, or
• Your spouse is a nonresident alien.

Updating personal information

It’s important to update your personal information with the IRS. When you legally change your name after marriage, there are tax consequences.

Updating your name after marriage

Once you have a marriage certificate, you’ll have to change your name on your Social Security card. Notify the Social Security Administration of a name change as soon as possible. If a name on your tax return doesn’t match the Social Security Administration records, it can delay the IRS processing of your return.

Moving? Make sure the IRS knows.

Ensuring that your tax documents are consistent and accurate will help you file your return as easily as possible.

Notify the IRS immediately of your new address so you may receive any refund or IRS notices or letters at your new address. You can change your address when you file your federal income tax return, or if you have already filed your return, you may file IRS Form 8822, Change of Address.

Assessing income and withholding

After getting married, couples should consider changing their withholding, which is the part of an employee’s wages that is withheld from their paycheck and sent directly to federal, state, and local authorities.

Newly married couples should give their employers a new Form W-4, Employee’s Withholding Allowance, within 10 days. If both spouses work, they may move into a higher tax bracket, or be affected by the Additional Medicare Tax.

Dismissing the W-4 as “new job paperwork” may only end up costing you. It’s smart to look into updating any time your life changes.

Tax implications for joint assets and investments

Some couples that file Married Filing Jointly might experience what’s known as a “marriage penalty” or a “marriage bonus,” depending on the total of their combined income. According to the IRS, more people are likely to experience a marriage bonus than a marriage penalty.

A marriage penalty occurs when the couple’s combined income puts them in a higher tax bracket. A marriage bonus occurs when the combined income keeps the couple in a lower tax bracket.

Marriage penalties are also more common if the couple has similar incomes, while a marriage bonus is more common if the couple has very different incomes. Talk to your Tax Pro about what makes sense for your situation and what credits or deductions you may be eligible for.

Deductions and credits for newly married couples

Once you’re married, there are many new credits and deductions available to you. For example, the Earned Income Tax Credit (EITC) is a federal tax credit for eligible individuals and families who have earned income from employers and self-employment income such as small businesses and side jobs.

Taxable earned income includes wages, salaries, tips, and net earnings from self-employment. The credit is used first to reduce any remaining tax liability to zero and because the credit is refundable, money left over is part of the tax refund.

The largest groups of people affected by the EITC are low- to middle-income earners who may or may not have children. About one-third of people who qualify for the EITC are newly eligible each year because of changes in life circumstances—like having hours cut from full-time to part-time at work, being laid off, or having a child.

There’s also the Child and Dependent Care Tax Credit. You may be able to claim credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work.

It’s important to note that you may not take either of these credits if your filing status is Married Filing Separately. Work with your Tax Pro to figure out which credits and deductions may help you as you and your spouse start your new lives together.

Retirement contributions and planning as newlyweds

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan.

Depending on your adjusted gross income reported on your Form 1040 series return, the amount of the credit is 50%, 20% or 10% of:

• Contributions you make to a traditional or Roth ,
• Elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,
• Voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,
• Contributions to a 501(c)(18)(D) plan
• Contributions made to an ABLE account for which you are the designated beneficiary.

The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). Talk to your Tax Pro about how you and your spouse can claim this credit and others. Also make sure that you and your spouse have designated each other as beneficiaries on your retirement plans.

Being a newlywed is a time of great joy and excitement—but can also mean a lot of change. Our Tax Pros are there to answer any questions you may have as you continue to grow as a couple. Find one near you.

About the Author

Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.

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