Accounting Tips

August 25, 2015

7 Tax Moves for Newly Married Couples

If you’re a newlywed, you and your spouse probably know by now what you like to do as a couple and what you like to do separately. Brunches and birthday parties? See you there. Poker nights and pedicures? See you later. But when it comes to combining your personal finances, the lines between yours, mine and ours may not be so clear.

Look at ALL Your Possible Tax Breaks
If you file jointly, your spouse’s tax breaks are yours as well. Make sure that you review ALL of your tax breaks from the past year. If you just got married, you might be able to take advantage of your spouse’s generous charitable donations to help lower your bill. Consider investment losses, dependent care credits, education credits, mortgage interest, and other tax breaks. Go back through the finances for both of you and identify your joint tax breaks – and see if you have time to rack up a couple more tax breaks before the end of the year. This is also a good use of tax planning with your accountant to come up with a strong tax strategy.

Double Check Your Tax Withholding
Now that you have a new tax status, it’s important to review your tax withholding. Does your combined income with your spouse put you in a higher tax bracket? If so, you might not be withholding enough. Check with your accountant to figure out if one or both of you need to make changes to your tax withholding amount. You want to make sure that you begin withholding more from your paycheck, or you could be surprised by your higher tax bill come April.

Think twice before merging credit cards
Before you merge your credit cards, check your individual credit scores. The most common way to piggyback on a spouse’s credit card is to sign on as an authorized user. But once you’re authorized, the card’s previous history will appear on your credit report; if the account has blemishes, your credit score will get dinged. You could also open a joint credit card. In that case, however, both spouses are responsible for the full balance of the account, so one person behaving badly will negatively affect both credit scores.

Gerri Detweiler, director of consumer education at Credit.com, says a common strategy is to authorize your spouse to use a card that offers favorable terms, attractive rewards and has a positive credit history, and for both spouses to maintain separate credit accounts as well. That way, she says, you can pool household purchases and work jointly toward earning airline miles or rewards points.

Many couples approach bank accounts similarly. The hybrid approach, with a joint account for shared expenses and individual accounts for personal spending, is a good way to go for many couples. However you choose to handle it, communication is essential. “Have these financial discussions early,” says Detweiler, “while they’re still money talks and not money fights.”

Choose the Right Type of Insurance
Assuming you’ve recently registered for your wedding, it should be easy to create a detailed home inventory, complete with estimated values for all of your possessions (see 3 Simple Steps to Create a Home Inventory). Knowing the value of your things will help you determine how much renters or homeowners coverage to buy, says Jeanne Salvatore, of the Insurance Information Institute. A typical renters policy costs $16 per month and provides $25,000 in property coverage and $300,000 to $500,000 in liability coverage. Homeowners policies usually cover personal possessions at a rate of 50% to 70% of the coverage on your home.

Getting married also gives newlyweds more choices when it comes to health insurance. If both of you have coverage at work, do a cost-benefit analysis. One spouse’s employer may offer better coverage than the other’s, but many employers now charge dependents a larger percentage of the cost than they impose on employees, and some businesses add a surcharge for spouses who could get coverage elsewhere.

You may be able to skip life insurance until you have kids—unless you’re buying a house together and need two incomes to pay the mortgage.

Change Your Name with the Social Security Administration
Changing your name on your Social Security Card is step one. You want the name the Social Security Administration has to match the name on your tax return. If you have changed your name as a result of the marriage, you need to make sure that is reflected with all of the proper agencies. You need to fill out and file a Form SS-5 with your local Social Security Administration office. You’ll receive a new card, but your Social Security number will remain the same.

If you didn’t change your name as a result of the marriage, there is no need to file with the Social Security Administration.
You’ll want to change your name at the SSA before you try to change it on your driver’s license or any other documents. It can save you a lot of time because the SSA document can be used as proof for the license, which is then used as proof for everything else (utility bills, banks, credit cards).

Consider the Possibility of Filing Separately
In most cases, it makes sense to file jointly. However, depending on your individual tax situations this year, it might make sense to file as married filing separately – at least at first. Take the time to figure your taxes with both scenarios to see what your tax bill ends up being. You can re-evaluate your tax filing status next year to see if the best option has changed.

Same-Sex Couples Can File Federal Taxes Jointly or Married Filing Separately.
For tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or jointly filing status. For tax year 2012 and all prior years, same-sex spouses who file an original tax return on or after Sept. 16, 2013, generally must file using a married filing separately or jointly filing status. For tax year 2012, same-sex spouses who filed their tax return before Sept. 16, 2013, may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status. For tax years 2011 and earlier, same-sex spouses who filed their tax returns timely may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status provided the period of limitations for amending the return has not expired. A taxpayer generally may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later.

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