So, you’ve tied the knot. Congratulations!
A new, joint outlook can bring a lot of exciting changes. Perhaps you and your spouse are moving to a new state, or maybe you’re considering purchasing your first home. Regardless of the specifics, getting married is a big deal.
Unfortunately, not all the changes that marriage brings with it are quite so fun. In fact, one of the biggest adjustments couples often find themselves making relates to finances. From shared bank accounts to health insurance and debt to budgeting, there are many financial “growing-together” pains that a lot of couples don’t completely anticipate before they say, “I do.”
Take taxes, for instance.
First-time joint filers discover there are some serious changes to expect when they start filing for two. Deductions can lower, qualifying thresholds shift around, and you may even jump up an income bracket! While you’re in this together, these tax time changes to your filing status can serve as a serious shock to your system.
Just because you’re married doesn’t mean you’re required to file a joint tax return. Far from it! There are even some cases when filing separately might be the best way to go—here are a couple major ones:
Not every taxpayer has a spotless record with the IRS, and even if they’ve kept current with their taxes and payments, it’s still easy to make mistakes.
Sadly, if you file your taxes jointly, your spouse’s messy tax situation can become yours. Because you’re filing one joint tax return, the IRS doesn’t take into account the individual whose numbers may be off on one income stream, or whose receipts may require more scrutiny via the IRS audit process. Nope, you’ll both be audited, because the IRS will be auditing your single tax return.
If you know your new spouse has recently been audited or you suspect some of the information on the return is incorrect, it may be in both of your best interests not to file jointly. It never hurts to be cautious!
Deducting out-of-pocket medical expenses can be one of the biggest windfalls of filing your tax return, but the process can get a little messier for couples filing jointly.
The IRS allows taxpayers to deduct any unreimbursed medical care expenses (preventative care, treatment, surgeries, dental, and vision care) that exceed 10% of their adjusted gross income, or AGI. So if you earn $50,000 a year, you’ll only be able to deduct medical expenses that exceed $5,000. Because of the cap, that makes qualifying for the deduction more difficult for a two-income household.
If you or your partner have had some big medical bills come up throughout the year, it’s worth crunching the numbers to determine whether or not you should file separately. It may make thousands of dollars worth of difference to your refund!
If you and your spouse don’t fall into one of these specific tax situations, you’ll almost always gain more benefits from filing a joint return than from filing separate ones. The IRS encourages you to file a joint return through access to higher deduction thresholds and tax credits—and disqualification from others when filing separately.
A few advantages of filing joint returns:
It may feel like an extra hassle. And technically, it is. But the fastest way to see which filing approach is best for you and your new spouse is to prepare your taxes both ways and see which refund is bigger.
Not only does this eliminate the potential that you may have made the wrong decision, but it will help you learn more about the specific differences between filing jointly versus separately as a married couple. And the answer may surprise you! You may discover that the deductions for out-of-pocket medical expenses you lose by filing jointly may be outweighed with a higher standard deduction!
More than most financial topics, taxes seem to go unaddressed before couples have tied the knot. But this is a surefire way to go into your marriage on rocky financial footing, and it may just prove to be a serious hassle down the line.
Before you share your life together, share your financial outlooks together. Understand your tax backgrounds and financial situations so you can go into your marriage unified—whether or not you end up filing jointly!
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