Ed. Note: This post has been so popular, we decided to update it. Check out the new version for the latest tax information, including one brand new change you’ll need to know about when filing your 2014 tax return. Go there now!
1. Filing status. Once you get married, the only filing statuses that can be used on your tax return are married filing jointly (MFJ) or married filing separately (MFS). Your filing status is determined on December 31 of each year, so even though you were not married the entire tax year, you do not have the option of filing as single. Generally, married filing jointly provides the most beneficial tax outcome for most couples. One reason for this is that some deductions and credits are reduced or not available to married couples filing separate returns.
2. Tax brackets. Tax brackets are different for each filing status, so your income may no longer be taxed at the same rate as when you were single. When you’re married and file a joint return, your income is combined — which, in turn, may bump one or both of you into a higher tax bracket.
3. Additional exemption and increased standard deduction. Married couples filing a joint return get to claim two personal exemptions (one for each of you) on the tax return instead of one as when you filed as a single individual. Additionally, the standard deduction allowed on the tax return is highest for married couples filing a joint return. For 2012, single taxpayers are allowed a standard deduction of $5,950 while married couples filing a joint return are allowed a deduction of $11,900.
4. Changing your W-4. Because of the additional exemption and higher standard deduction you are allowed to claim on a joint tax return, it may be wise to change your Form W-4 with your employer to reflect these changes. Claiming an additional allowance and/or changing withholding to the “married” rate on your Form W-4 means that less taxes are withheld from your pay.
5. Buying your first home or selling one. Once you get married, your combined incomes may allow you to purchase your first home or you may choose to sell individual homes owned before the marriage. When you own a home, interest you pay on your mortgage is deductible on your tax return as an itemized deduction. If you’re selling a home, the amount of gain that can be excluded from income doubles from $250,000 to $500,000. Be cautious, though: if only one of you owned the home before the marriage, the $500,000 exclusion applies only if you both live in the home at least two years.
6. Itemizing vs. claiming the standard deduction. When you file your return each year, you have to determine if it is more beneficial for you to itemize versus claim the standard deduction. Once you are married and own a home, many people find that it is more advantageous to itemize their deductions — typically because deductions such as mortgage interest result in a higher total deductible amount than the standard deduction.
7. Children. A dependent standard deduction is allowed for each child claimed as a dependent on the tax return. This amount is generally $3,800 per child (for 2012).
8. Gift taxes and estate planning. Spouses are allowed to give unlimited gifts of cash or other property to one another free of gift taxes. This provision has important implications for estate planning purposes, so be sure to get your estate plan redone once you get married.
9. Name change with Social Security. Because your return is filed under your Social Security number (SSN), it is important to ensure that the Social Security Administration has been notified of any name changes that take place. The SSA must process the change in the system and relay that information to the IRS before filing your return. You should wait to file your return until after the name change process has been completed to avoid any complications that could arise if the name on the return does not match the SSN on file with SSA.
10. Marriage penalty. A marriage penalty exists when two individuals filing a joint return pay more tax than the sum of their individual tax liabilities calculated as if they were filing as single taxpayers. One reason this occurs is when the MFJ income tax brackets and standard deduction are not equal to twice the single income tax bracket and standard deduction. Under current law, the marriage penalty is partly alleviated because the lower income tax brackets (10% and 15%) and standard deduction for MFJ are exactly double that of single individuals. However, that may not be the case after 2012 as the provision providing for relief from the marriage penalty is set to expire. At this time, it’s unclear if Congress will extend the relief.