Love and Taxes – How Marriage
Affects Your Tax Return
February 3, 2024
Marriage is often described as a union of hearts and souls, a beautiful journey shared with a loved one. However, when it comes to taxes, marriage goes beyond just a romantic partnership; it becomes a financial partnership as well.
When you say "I do," your tax situation undergoes changes. Your filing options for the entire year are influenced by your marital status as of December 31. The determination of your official marital status is a key aspect governed by state law. If, by the year's end, you find yourself happily married, you'll face a decision between two filing statuses: jointly with your new spouse as Married Filing Jointly, or separately as Married Filing Separately.
For most married couples, filing jointly is the preferred option, as it is simpler and often more financially advantageous. Joint filing makes you eligible for numerous tax deductions and credits. However, it's essential to consider potential complications, such as the IRS offsetting joint tax refunds to settle individual debts, including back taxes, delinquent child support, or defaulted student loans.
When filing jointly, you also incur "joint and several liability," meaning the IRS can collect a joint liability from either spouse, even post-divorce. In cases of unintentional tax errors or deliberate tax offenses by your spouse, you share responsibility. Filing separately may seem appealing to avoid such liabilities, but it can make you ineligible for certain tax deductions and credits, like the credit for child and dependent care expenses or the earned income tax credit (EITC).
Choosing a filing status is a joint decision, and it's crucial to be aware of the implications. Once a joint return is filed, you cannot opt for separate returns for the same year after the due date.
Additional considerations when getting married include updating your Social Security Number (SSN) with the Social Security Administration (SSA) if your last name changes. Failure to do so may lead to IRS rejection or return of your tax return. Address changes should also be promptly reported to the IRS to avoid delays in receiving refunds or important notices.
Community property state residents filing separately may need to allocate income appropriately, and those selling homes should be aware of potential gain exclusions. Reviewing retirement plans, healthcare coverage changes, and reporting changes in circumstances to the Marketplace for the Premium Tax Credit are also important post-marriage considerations.
The rules for filing status can be complex, depending on your tax situation. If you have questions about the best filing status for your situation, consult the IRS website or seek advice from a tax professional.
Sources: Image by Leonardo Miranda
