Getting married has a big impact on your taxes. To help you navigate the changes, TaxACT spokesperson Jessi Dolmage offers this advice.
The most important way marriage impacts your taxes is the filing status on your tax return, explains Dolmage. Your filing status will determine amounts for exemptions, deductions and credits. “Your marital status on Dec. 31, 2012 determines your filing status choices for your 2012 income tax return, due April 15, 2013,” she says. “Even if you were only married for a week as of Dec. 31, 2012, you’re considered married for the entire year on your tax returns.”
Filing status: What to do
The majority of married taxpayers choose filing statuses of “married filing joint” or “married filing separate,” but don’t assume both filing statuses will have the same results on your taxes, notes Dolmage. “Generally, you should choose whichever status results in lower taxes owed or a larger refund amount,” she advises, and shares a few tips to help you decide what’s best.
- If you live in an income-taxing state, factor into your decision your state’s rules about filing status. Many require that the filing status on your state return match the status on your federal return.
- If your spouse has outstanding tax or other financial obligations such as back child support, it may be more beneficial to file separately (file with the status of “married filing separate”).
- If you and your spouse choose to file separate returns (filing with the status of “married filing separate”), remember that both returns have to claim either the standard deduction or itemize your deductions.
Advantages to filing as a married couple
Depending on what you decide, filing as a married couple can have some advantages. “Generally speaking, more tax benefits are available to those claiming the married filing joint status,” says Dolmage. “For instance, married filing separate taxpayers don’t have the option of claiming the credits for college expenses, earned income and child and dependent care.”
Tax prep tips
Dolmage shares some of her best tips for preparing your taxes.
- Take a few minutes to get organized before starting your taxes. You can use TaxACT’s free checklist.
- The fastest and most economical way to get your refund is to do your taxes online, e-file and choose direct deposit.
- Before filing, double-check Social Security numbers, bank account numbers and spelling of names. Misspelled and incorrectly typed numbers and names are among the most common mistakes made on returns.
- File and pay by the April 15 deadline to avoid IRS penalties and interest. If you file for a six-month automatic extension, remember any balance is still due by April 15.
- Don’t procrastinate. Rushing can lead to costly mistakes.
What if you’re divorced?
“Most people don’t realize the depths of what divorce can do when it comes to their finances,” explains Samantha Fraelich, certified financial planner (TM) professional, and vice president of Bernard R. Wolfe & Associates, Inc. She shares a few ways divorce can impact your taxes and financial situation.
Legal assistance: This will likely be costly. Be prepared to spend thousands (or more), even if you think it will be an amicable divorce, Fraelich warns.
Childcare expenditures: If children are involved, child support will need to be paid by the parent who doesn’t have sole custody of the kids. “But for the one who does end up having sole custody of the children, keep in mind that it’s typically more expensive for you, since many costs pop up at the last minute and it’s tough to split everything like that with a former spouse,” Fraelich explains.
Tax brackets: Tax brackets will change once you go from married filing jointly to head of household, Fraelich says. “Going from a joint filing status to a single filing status could increase your taxes. Be prepared for this so there are no surprises at tax time.”
Future planning: Your plan for retirement has probably drastically changed now that you won’t have two people sharing the costs. “It is usually helpful to get a retirement plan run by a professional, ensuring it includes the proposed settlement agreement, before you actually sign divorce paperwork, advises Fraelich. “That way, you’ll know whether the numbers will work in the future for you, as well as today.”