For Richer, For Poorer…
When it comes to taxes… it’s complicated! Adding a new marriage into the mix can make things easier, or even more complex when it’s time to file. Here are a few things to keep in mind as you begin looking at your first tax year as Mr. and Mrs.
Your Filing Status
When you’re unmarried, you have quite a few options for choosing your filing status at tax time. If you’re married on December 31st of the tax year… you’re married for the whole year. You can file as “Married, Filing Jointly” or “Married, Filing Separately.” The truth is, you’ll need to review a few things before you can make this decision.
There are some circumstances when it makes sense to file separately, but you should understand the differences. Combining your incomes on your tax returns can push you into a higher tax bracket, and increase the amount you would each pay if you file separately. On the other hand, if one of you makes considerably more, or all the income, filing jointly can reduce the total amount of tax obligation.
Take counsel from your tax accountant to understand whether it makes sense to file jointly or separately this year.
Should You Itemize Expenses, or Take the Standard Deduction?
With the increased value of the Standard Deduction, most individuals are opting to take advantage of the standard deduction, rather than go through the more complicated process of itemizing deductions. For the tax year 2019 (tax return you will file in 2020), the standard deduction will increase to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples.
This increase offers an opportunity for more people to use the standard deduction, as opposed to itemizing deductions. You should seek expert advice from your accountant to determine which way makes more sense for you.
Selling your Home, or Both Homes while Married
If you’re both homeowners when you take your vows, you are each entitled to a $250,000 tax-free profit on your homes. Additionally, if you sell one home and live in the other, you can claim the $250,000 benefit tax-free, live in the remaining home for at least two years, and then claim $500,000 tax-free profit on that home.
So, homeowners get a significant tax break when they get married… If they plan correctly. It all depends on knowing what the system allows ahead of time and planning your tax strategy ahead of time.
Planning Your Tax Strategy with Your Accountant
Having a professional accountant by your side makes all the difference when you are planning for the future and understanding your tax strategy as a married couple. At JStevens Accounting, we can sit down with you and talk about your financial future together from a tax perspective.
Understanding the impact your decisions may have on your taxes this first year, and in the following years, can protect your assets and help ensure your future success.
Let’s get together soon!