June is traditionally a favorite month in which couples tie the knot. It is a time of romance, but as is the case with so many major milestones in life, newlyweds also should be aware of the financial considerations associated with marriage, particularly taxes. If you or a loved one are planning nuptials, the Pennsylvania Institute of Certified Public Accountants (PICPA) offers this advice on the tax concerns.
Spread the News
If you or your spouse will be changing your name, be sure to report it to the Social Security Administration
so your new name matches your Social Security number when you file your next tax return. You can find Form SS-5, Application for a Social Security Card, at www.ssa.gov, your local SSA office, or by calling (800) 772-1213. Also let your employer know of any name change, and if you move after you get married be sure to update your address with your employer and the IRS.
Decide How to File
Once you are married, you and your spouse have a choice between filing your taxes jointly or separately. Filing jointly is usually the best choice because it allows you to take advantage of some significant deductions and credits that aren’t available to those who file separately. You may still want to consider filing separately, however, if it’s beneficial for you to keep your income separate for alimony or child support purposes, or if it will enable you to qualify for medical expense or other deductions that are based on a percentage of your income. Your CPA can offer advice on which choice is right for you.
Update Your Status
Consult your CPA or use the IRS Withholding Calculator
to decide whether you should change your withholding amount on your W-4 based on your new combined income. In addition, give some thought to the best form to use when you next file your tax return. You may have been filing a Form 1040EZ or 1040A as a single person, but the change in your marital status, the purchase of a new home, or other changes may qualify you for more deductions. You will probably need to begin itemizing on your annual Form 1040. Your CPA can help if you’re not sure which form to use.
Line Up Your Deductions
Did you buy a new home when you got married? If so, find out about deducting any points you paid on the mortgage and consider how your mortgage interest, real estate tax, and other deductions will affect your tax and overall financial situation. In addition, if you donate personal or household goods to charity when you combine your households, make sure to get a receipt so you can deduct their fair market value when you file your tax return.
Review Your Retirement Planning
Now that you’re married, consider starting or pumping up contributions to a tax-advantaged retirement account. This is particularly important if your employer offers matching contributions for a company-sponsored 401(k) or other retirement plan. The employer match is basically a free bonus, so it’s best to make the most of it. Any money you can put aside now has the potential to earn income and dividends over all the years leading to retirement, which could result in a nice nest egg. While you’re at it, be sure to change the beneficiary on your life insurance plans if appropriate. This is also a good time for you and your spouse to make or revise wills that set forth exactly who should inherit your money and other property.
Consult Your CPA
A wedding is a joyous event, but marriage can make your financial life slightly more complicated. Be sure to bring all your financial questions and concerns to your local CPA. He or she has the expertise to help you begin your married life on the right financial footing. To find a CPA in Pennsylvania by location or area of expertise, ask family or friends for recommendations or use the PICPA CPA Locator.