Transitioning from single to married life can be a challenge, and the U.S. tax code doesn’t make it easier.
Should you file jointly or separately? What if you change your name? And what’s this about a “marriage penalty”?
Here are several things for newlyweds and engaged couples to keep in mind during tax season.
File Jointly or Separately?
If you wed on or before Dec. 31 — no matter in what month — tax law considers you married for the year. You have two choices of filing status: married filing jointly or married filing separately.
For most couples, filing jointly will produce the lower tax bill. “Rarely is the separate status advantageous,” says Barry Picker, a Brooklyn, N.Y.-based certified public accountant.
One exception: He says filing separately could be better if the lower-earning spouse had very high medical bills. That’s because those are deductible only to the extent they exceed 7.5% of adjusted gross income, a lower threshold on a separate return.
If you aren’t sure which filing status is better for you, use tax-preparation software to see which has the better outcome, suggests Jackie Perlman, an analyst with H&R Block’s Tax Institute.
Note that same-sex couples can’t file their federal returns as “married,” even if they are legally married under state law.
Marriage Penalty
The so-called marriage penalty occurs when two people owe higher taxes as married filers than they would if they were still single. This happens because the combined income for a joint return might push the couple into a higher tax bracket.
Generally, if the two people have similar earnings, their taxes could go up because the top tax brackets don’t double, says Mark Luscombe, principal tax analyst at CCH, a Wolters Kluwer unit that offers tax and accounting information and software.
On the flip side, a big difference in income tends to produce a “marriage bonus,” says Mr. Luscombe.
Take Care of Changes
If you or your spouse changes a name, you have to notify the Social Security Administration, especially if you plan to file your federal taxes electronically through the Internal Revenue Service’s e-file program.
“If you put down your married name and the Social Security Administration has your maiden name, e-file will reject your return,” says Ms. Perlman of H&R Block.
While not as important as the name change, you should also notify the IRS if your marriage involves a change of address. You can wait until you file your next return, or you can change your address ahead of time by downloading Form 8852 from www.irs.gov.
Check Withholding
If you’re completing your first joint return now, for 2008, you may discover you need to adjust your withholding for the rest of this year. A 2009 wedding? “If you don’t want to have a surprise at the end of the year, review your withholding to see if it needs to be revised,” says Mr. Picker.
For the IRS’s withholding calculator, go to the IRS Web site and click on “Online Services” on the left side. Alternatively, visit hrblock.com and click on the “Calculators” tab.
