Tax Implications to Consider When Getting Married by Seema Jain, CPA
Getting married simply for tax benefits is not suggested; however, if you are getting married for good reasons, such as true love and compatibility, then take advantage of tax planning opportunities. For most married couples who decide to file their taxes jointly, their total taxes will be lower than if they were single filing separately.
Married couples filing jointly are entitled to a variety of tax credits that singles aren’t, including the Hope and Lifetime Learning Credit for student loan interest, the child and dependent care credit, and the adoption expense credit. Filing jointly can also help alleviate taxes you accrue on taxable investments like stocks. For example, if you invested in stocks that profited, but your spouse’s stocks took a dive, you can use his losses to offset the amount you would be taxed for your stock’s profits. Couples who file jointly can also contribute more to tax-deductible individual retirement accounts. In addition, a spouse with no income can contribute to an individual retirement account (IRA) even if he or she doesn’t work, which was not possible if they were single. Filing just one tax return for both of you can also save time and money that you would spend if you filed each return separately.
There may be circumstances that may warrant filing separately tax returns. It is important to remember that when you file a joint return, you are responsible for your spouse’s tax decisions as well as your own. If your spouse owes a lot in taxes, the refund you would have received will be reduced. Likewise, if one spouse has many miscellaneous deductions like business expenses, union dues or uncovered medical expenses, it may be wise to consider filing separately.Be especially careful of filing jointly if your spouse has defaulted on student loans, has not paid child support or has committed tax fraud in the past. In any of these cases, you should consider filing married but separately so that you do not become liable for these debts.
• If foreign bank accounts and assets are held, each spouse that has ownership or control over such foreign assets exceeding in total of $10,000 is required to report the foreign holdings.
• Estate tax planning opportunities are available. A deceased spouse can leave any amount of money to a spouse without generating estate taxes.
• If both spouses are working, often they have benefit packages from their jobs from which they can pick and choose the most valuable benefits from the two plans.
• It is important to carefully consider how the two of you will handle your day-to-day finances. New couples should be prepared to discuss financial goals, resolve differences (or at least agree to disagree) in spending habits, and establish a budget and/or saving and investment plan.
• You will also need to think about whether you want a joint bank account, separate accounts, or both. How much do you want to spend on vacations? On monthly food bills? Entertainment? Gifts? Personal items? What are your long-term financial goals?
• Do you have a financial plan? If you don’t, then now is the time to prepare one. Even if you do have a financial plan in place, since your marital status has changed it might be time to review and update it.
• If you intend to buy a home or other property or if you and your spouse already own property together, then you need to consider the best way for you to hold that property. Will the property be held solely by one spouse? By both spouses jointly? Because of the complex implications of the various forms of property ownership, you should seek professionaladvice.
Learn more about planning opportunities for married couples at: http://www.axiombusinessconsulting.com/life-events.php.
Learn more about Seema Jain, CPA, and her firm Axiom Business Consulting by calling (813) 395-0089 or visiting www.axiombusinessconsulting.com.