Roses are red, violets are blue -- but what does being married mean when taxes are due?
As a senior tax preparer at H&R Block, I have assisted many newlyweds filing their tax returns together for the first time. Many couples are unaware of how tying the knot affects their financial situation, and in turn, their filing status, withholdings and eligibility for certain tax credits and deductions. To help alleviate the stress for newly married couples or those planning to walk down the aisle, here are a few important tax tips:
Your Filing Status Must Be Married: If you said "I do" any time during 2012, you are no longer eligible to file as single for your 2012 return. Instead you must choose from one of two filing status options -- married filing joint (MFJ) or married filing separate (MFS). You may be asking yourself what's the difference?
In most cases, married filing joint will be your best choice. Tax rates are higher for married filing separate, so your overall tax bill will likely be less if you file jointly. You may also qualify for adjustments and credits unavailable to couples filing separately. However, under certain circumstances, couples may benefit from filing separately. Before making this choice you should consult with a knowledgeable tax expert about what makes the most sense based on your situation.
Double-Check Your W-4 Withholding Allowances: Remember that form you filled out when you first got your job? Well, now that you've "put a ring on it," you may need to adjust your withholding.
For couples where only one spouse is working, this may be as simple as changing from "single" to "married" and increasing exemptions from one to two. However, if both you and your spouse work, you should not both change to M-2 without first filling out the "Two-Earners/Multiple Jobs Worksheet" section of form W-4. Your combined incomes may put you into a higher marginal tax bracket than you each had as a single person. You should plan to file a new W-4 form with your employer. If you are unsure of your allowances, visit a tax professional for assistance.
Retirement Plans are Favorable for Married Couples: Certain retirement plans, such as an IRA, offer favorable rules for married couples filing a joint return. In order to contribute to an IRA, you must have earned income (from wages or self-employment).
But if only one spouse has earned income, the law allows the spouse with no income to make an IRA contribution based on the earned income of the working spouse, provided a joint tax return is filed. Additionally, spouses can inherit IRAs from one another and choose to treat the IRA as their own, which provides more payout options.
Remember, a lot of firsts come with getting married, such as buying a home and having children. Local tax professionals at H&R Block can help you navigate the tax implications of these major life changes.