It's wedding season. With the average cost of weddings at more than $27,000, planning for this one special day can require a significant financial commitment. Engaged couples should consider this good practice for marriage, as there are many more financial responsibilities that will come with their new relationship status.
One of the most significant changes that comes with marriage is a new tax filing status and there are several options. Married taxpayers can choose to file jointly or separately based on their individual situation. Generally, the "married filing jointly" status provides the lowest tax liability and the highest standard deduction. However, if one of the two has large deductions or expenses, it may be beneficial to choose the "married filing separately" status. When filing under the "married filing separately" status, if one spouse itemizes, then the other spouse must itemize, as well. Couples should also keep in mind that the Child and Dependent Care Credit, the Earned Income Tax Credit and certain other education credits are not available when using the "married filing separately" status.
If you are planning to tie the knot this year, here are some more items to keep in mind:
1. Name Change - Becoming a newlywed also often results in a new last name. Names listed in your tax return should match all forms of identification, including your social security card, passport, driver's license and documents from employers, loan holders and investment accounts. Your tax return will not be processed until the name on your tax return matches the name on your Social Security account;
2. New Year's Eve Weddings - If you're planning on a New Year's Eve wedding, the IRS recognizes a couple's marital status on the last day of the year. So, even if you wed right before midnight on December 31, you are considered legally married for the full 2012 year;
3. Changes to Your Withholdings - If both you and your spouse work, your combined income may place you in a higher income tax bracket. You can use the IRS Withholding Calculator to determine the correct amount of withholding needed for your new filing status;
4. Newly Wed in a New Home - Did you and your spouse purchase a new home together? If so, there are a wide variety of tax breaks available to first-time homebuyers, as well as to existing homeowners. While most of the expenses incurred when buying a home are not deductible, many of the closing costs can be added to the basis of residences;
5. Owe Back Taxes - If the IRS is keeping all of your or your spouse's refund because you owe back taxes, delinquent student loans or child support, you should consider filing a joint return. The government allows you to file a special form - Form 8379, Injured Spouse Allocation -- that ensures the spouse who doesn't owe taxes, or other debts, can keep their share of any refund; and,
6. Change of Address - Don't forget to file a change of address with the IRS if one or both of you moves after you are married. Complete Form 8822, Change of Address, and mail it to the IRS to update their records. Don't forget to let the post office and your employer know your new address as well.
Marriage is an important life change, and it is equally important to get your tax situation in order soon after the big day. It pays to consult a knowledgeable tax professional who can help you get the most out of your new filing status now in preparation for filing your income tax return.