Tax Tips for Newlyweds
Federal Tax Considerations for Newly Married Couples
A wedding is a joyous occasion – but with marriage comes a host of new tax considerations.
Whether you are soon-to-be-married or newly married, you should take the time to review your tax situation as a couple. There are a number of steps you can take to avoid stress (and any unpleasant surprises) at tax time.
Here are 5 important tax tips for newly married couples:
1. Report Your Name Change
If you changed your last name as a result of the marriage, you must notify the Social Security Administration (SSA). You will need to file Form SS-5 (Application for a Social Security Card) at your local SSA office and provide a recently issued document as proof of your legal name change. This must be done so that your name and Social Security Number (SSN) will match the IRS records when you file your next tax return. Failing to follow through on this can lead to a rejected tax return and/or IRS inquiries when you file a joint return for the first time.
2. Report Your Change of Address
If you move, you must notify the IRS of your change of address. There are a few different ways you can do this:
• File Form 8822 (Change of Address) at any time, and make sure to include information for both spouses;
• Use your new address on your next tax return; or
• Send the IRS a signed written statement (that includes your full name, old address, new address, and SSN) and mail it to the address where you filed your last tax return
3. Adjust Your Filing Status
Once you are married, you have the option of filing your tax return jointly or separately. When preparing your first tax return following marriage, it is generally a good idea to calculate your taxes using both the ‘married filing jointly’ and ‘married filing separately’ statuses. This will help you determine which option is best for you (i.e., which filing status results in the lowest tax).
Note that taxpayers with certain types of deductions (such as medical expenses, which are subject to limitations) may have a lower overall tax burden if they file separately. When making this comparison, it is also important to consider any tax deductions (or other tax benefits) that are not permitted on ‘married filing separately’ returns – such as the Earned Income Tax Credit (EITC).
4. Adjust Your Withholding Tax
You should complete a new Form W-4 (Employee’s Withholding Allowance Certificate) to adjust your withholding status and allowances. When both spouses work, some couples find that not enough tax is being withheld at the married tax rate. To avoid this result, you can check the box for “Married, but withhold at higher Single rate” on your Form W-4.
Having enough tax withheld will depend on whether your spouse also works and claims any allowances on his/her own Form W-4. Remember that “0” (zero) allowances will result in having the most tax withheld.
If you and your spouse are both employed and you expect to file a joint return, figure your withholding allowances on 1 set of worksheets and use your combined income, adjustments, deductions, exemptions, and credits. You can divide your total allowances however you choose, but you cannot claim an allowance that your spouse also claims. On the other hand, if you and your spouse plan to file separate returns, figure your allowances using separate worksheets based on your separate income, adjustments, deductions, exemptions, and credits.
5. Enroll in the Health Insurance Marketplace
The Affordable Care Act (ACA) has brought about a number of new healthcare regulations, which need to be reviewed once you are married. Being married gives you the opportunity to sign up for health insurance during a special enrollment period – if one or both of you is uninsured, you may be able to get coverage now. Note that the special enrollment period for the Health Insurance Marketplace is usually open for 60 days from the date of a life-cycle event (in this case, marriage).
If you (or your spouse or dependent) get health coverage through the Health Insurance Marketplace, you must inform the Marketplace that you are now married. Your marriage status can affect your Premium Tax Credit, especially if you receive health coverage assistance via advance credit payments from the government. You should also check whether getting married affects your health insurance coverage through your employer (or your spouse’s employer), because that will impact your eligibility for the Premium Tax Credit.