Taxes were probably not even on your radar on your wedding day, but that switch from being single to being married has a big impact come tax time. It may feel like a rude awakening to be jolted out of your honeymoon phase with a looming tax return in your first year of marriage. Thankfully, filing taxes when you're married really isn't that complicated, especially if you use OnePriceTaxes. These tips can help you understand the financial impact marriage has on taxes, file correctly, and strategize how to get the biggest refund possible.
1. Notify the Social Security Administration and IRS of changes: Before you file your taxes, you will want to make sure both the Social Security Administration and IRS have your latest information. In particular, you need to change your name through the Social Security Administration if you legally changed your name as a result of your wedding. The name you use on your tax return needs to match the name on file with the Social Security Administration to avoid triggering red flags. In addition, if you moved during the year, file the Change of Address Form 8822 with the IRS prior to filing your taxes.
2. Remember, December 31 weddings count as marriage for the whole year: Even if you waited until the last day of the calendar year to tie the knot, you must file your taxes for the year using a married status. It's not up to you to choose whether you'd like to file as single. If you had wanted to do that, you would have needed to wait until 2014 to get married.
3. Choose between filing statuses: Married couples have two options for how to file taxes. They can either file as married filing jointly or married filing separately. If you're unsure of which one is best for you, one idea is to go through and prepare your returns both ways and then file using the method that makes the most sense and results in the lower tax bill overall. It may be more advantageous for you to file separately if one of you has high medical costs and the other has a high income that makes deducting the medical costs impossible. Another reason you may want to file separately is if you need to clarify exactly how much income is yours for the purposes of paying child support or alimony from a previous marriage.
4. Claim student loan interest deduction and education credits: If you're opting for a married filing jointly tax return, make sure to consider both of your potential tax write-offs as you file. For example, you can deduct your student loan interest even if you aren't itemizing deductions. Couples who are married filing jointly can also claim the education tax credits, which will allow couples with one spouse working and the other in school to significantly decrease their tax bills and often end up with refunds to help make ends meet on a tight budget.
5. Check if you qualify for the earned income credit: Your household size has an effect on whether you can claim the earned income credit, so now that you're filing together, don't forget to look up whether you're below the income threshold. If you or your spouse have a qualifying child, you are even more likely to be able to claim the earned income credit.
6. Contribute to an IRA for each of you: One of the perks of being married is that IRS rules allow you to contribute to an IRA for your spouse, even if your spouse doesn't work. You may be able to take tax deductions or tax credits for the money you contribute to retirement accounts, and the tax perks are phased out at higher income levels for married filers than single ones.
7. Remember tax deductions for your home: Many newly married couples buy a home together, so if you bought a home in 2013, you'll want to gather documents about the purchase before you file your taxes. OnePriceTaxes will walk you through the process of claiming deductions related to your home. The most common ones are mortgage interest, points paid to buy down your interest rate, property taxes, and mortgage insurance. If your spouse already owned a home, you can claim these deductions together.
8. File an injured spouse allocation if one of you has tax liens: The baggage your spouse brings into the marriage may include some past debts that have resulted in tax liens. These do not have to force you into filing separately to protect your portion of the tax refund from being garnished. Instead, you can just file an injured spouse allocation, Form 8379, to avoid penalties on your part of the tax return.
9. Change your withholding status with your employer: After you're done filing your taxes, if you discovered that you owed money or had a huge refund, it would be worth changing your withholding status with your employer so it doesn't happen again next year. You can fill out a new form W-4 at any time to adjust how many withholding allowances your employer counts when determining how much money to pass along to the IRS from each of your paychecks.
10. Evaluate benefit options for next year: Now is the time to make changes with how you manage your money so you can see tax perks next year. For example, you may be able to use a Health Savings Account or Flexible Spending Account for health care through your employer to shield the money you spend on medical costs from counting as taxable income. Other benefits to consider include retirement accounts and dependent care spending accounts if one or both of you have children.
Now that you have all the tax tips you need, it's time to file your tax return. Rather than putting off the task until the last minute, just dig in now. Once you submit your tax return, you can get your refund if you're owed one and start your discussions about how to use it. You may even get to both have your way on that one because many married couples find that they pay less in taxes once they're married than they did when they were single!