Congratulations newlyweds! Marriage marks an exciting new chapter filled with joy, companionship, and financial teamwork. As you merge your lives together, be sure to update these key tax items to ensure smooth sailing during tax season.
Change your name on all official documents
One of the most important things to do is change your name on all your identification, financial, and legal documents. This includes your Social Security card, driver’s license, passport, bank accounts, investment accounts, insurance policies, wills, powers of attorney, and any professional licenses.
Failing to change your name can cause issues when filing taxes, especially if you use your new married name on your tax return but your Social Security card is still in your maiden name. The IRS wants total consistency to avoid fraud.
Here’s an example of what you don’t want to happen:
You change your name everywhere except your Social Security card. When tax season comes, the IRS will likely reject your return because your names don’t match. Don’t let this happen to you – change your name early and thoroughly.
Update your tax withholding paperwork
Since you are now filing taxes jointly as a married couple, you’ll want to submit new W-4 forms to your employers that reflect your combined incomes and tax situation. Using the IRS tax withholding calculator can help you determine the optimal allowances and additional withholding to claim.
Review whether you need to change your address on your W-4 if you are moving in together. Coordinate with your new spouse to ensure enough taxes are being withheld from your paychecks to avoid penalties – but not so much that you overpay the IRS!
Understand how tax brackets change
Tax brackets differ substantially when filing jointly versus as a single person. Educate yourself on the income ranges in the new brackets you fall into as a married couple.
For example, the 24% bracket for single filers in 2023 applies to incomes between $95,376-$182,100. But for married couples, that bracket doesn’t kick in until their joint income exceeds $190,750.
Knowing your new tax bracket will help you adjust your W-4 withholdings accurately. Aim to withhold just enough to avoid owing penalties when you file, but not too much that you miss out on your own money throughout the year.
Homeownership brings new deductions
If newlywed bliss includes buying your first home together, congratulations! Be sure to understand the many tax deductions now available to you as homeowners.
You can deduct mortgage interest, property taxes, and some home improvements and repairs. Keep detailed records of your payments and expenses, as every deduction helps reduce your taxable income.
Also educate yourself on capital gains taxes when you eventually sell, as well as the $500,000 married filing jointly home sale exclusion. Knowledge is power when it comes to minimizing taxes as homeowners.
Strategize retirement savings as a team
With your new family finances combined, take a fresh look at your retirement planning strategy. Make sure you are taking full advantage of tax-deferred savings opportunities.
If you have a non-working spouse without a retirement account, you can open a spousal IRA in their name and contribute up to $6,500 annually as a couple in 2023. If your employer offers a 401(k) match, try to contribute at least enough to get the full match.
And lastly, be sure you and your spouse have updated all beneficiary designations so your assets go to the right people. Communicating about long-term priorities sets you up for success.
Let the tax planning begin!
Embarking on your new journey as a married couple is so exciting. With some strategic tax planning and open communication, you can make the most of your combined financial resources. Be sure to reach out to your trusted financial advisors and tax professionals to discuss your unique situation in more detail. Wishing you a lifetime of joy, adventure and love!