Taxes Don’t Take a Honeymoon When You Marry

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When you are newly married, you begin a life that requires many personal adjustments. A change in tax status requires attention as well. Though getting married isn't a taxable event, it is smart for couples to consider the tax issues at the outset.

If one of you is the major breadwinner, then getting married might save some income taxes as the joint tax rates may well reduce the top tax bracket that he/she is paying. In that case, getting married before year-end would be wise. But if you are both employed and earn similar incomes, you might end up paying more taxes after marriage. In that case, you could consider putting off the wedding until the first of the next year. Popular tax-planning software can help you to project your tax liabilities so that you can decide what's best.

Filing separately usually doesn't benefit married couples, since those filing separately are barred from many deductions and credits. But there are some instances when a separate return is advised - when income needs to be reported separately to clarify child support or alimony issues, or to qualify for your children's scholarships.

You will need to make some necessary changes to reflect your new status. If one or both of you has changed your name, you will need to report the name change to the Social Security Administration so that there won't be questions at tax time. The required forms are available at www.ssa.gov . You will also want to change the beneficiaries on retirement plans and life insurance policies, if necessary, and file new W-4s with your employer to revise your withholding status from single to married.

Moving in together may also yield some tax benefits. If you have ended up with multiple small appliances and house wares, donating duplicates to charity will garner a tax deduction. Again, try to do so before year-end, making a list from which to calculate the value of the donation. Additionally, if you've just bought a home together, the points paid on the loan are deductible in that year.

Finally, some estate planning is in order. If you have any children from a prior marriage, you should consider using A-B trusts to avoid estate taxes upon death, give income to your surviving spouse for life and pass the remaining assets to your children. You may each need separate trusts to provide for your new patchwork family.

FPA member Ginita Wall, CPA, CFP ® , CDFA™, is co-founder and director of the non-profit Women's Institute for Financial Education .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 FPA All Rights Reserved


This article appears in: Personal Finance , Taxes

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