Tying the knot may bring more changes to your new relationship than you anticipated. Besides combining property residences and families marriage also brings a combining of financial assets and penalties. If you are planning a wedding in the near future or you are a newlywed here are some of the impacts your new union will have on your taxes.
Joint Tax Returns
When you get married one of the primary disadvantages is that you are on the hook for any discrepancies that come up on your joint tax return. You will need to sign the return even if you didn’t work and you can be liable for any fraud or mistakes that occur regardless of your employment status. Always examine what you are signing.
One of the benefits to filing a joint return is that there are advantages for retirement planning. For example a non-working spouse can contribute to an IRA as long as the other spouse earned money that year. Also the income limits that apply to your IRA contribution when you are a participant in a qualified retirement plan increase substantially if you are married.
If you sell your home as a single person you can deduct up to $250K in capital gains whereas married couples can claim up to $500k. As long as both spouses resided in the house for two of the previous five years it doesn’t matter if only one of you owned the property.
For tax purposes this is how you are categorized; if you are married at any time during the previous year you are considered married for the entire year according to the IRS. Similarly if you get divorced during the year you are considered unmarried for that entire tax year. If your spouse dies you can still claim married for that entire tax year.
Unlimited Marital Deduction
The unlimited marital deduction allows you to pass assets to your spouse with no federal estate or gift taxes imposed as long as your spouse is a U.S. citizen. In other words you can plan your estate so that it does not pay estate taxes until both spouses have died. This gives the surviving spouse the ability to enjoy all of the assets until death undiluted by the estate tax.
Marriage has a lot of perks some of those can actually be financial perks if you know how to take advantage of them. Seek out the trusted wisdom of an accountant CPA or financial adviser to find out what tax advantages you and your spouse can utilize now that you have tied the knot of financial union. For more information on this topic or how to handle your newly combined resources Lindemeyer will be glad to assist you.
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