Our US Tax author Scott M. Estill celebrates Americans finding their life partner with ten ways to maximize your financial union at tax time. This is part 2, to find his first five tips, see Part 1.
6. Conscious Coupling
It may be easier for you and your spouse to itemize tax deductions after marriage given that you both can combine your deductions if you file a joint tax return. These deductions include charitable donations, state and local taxes, mortgage interest, investment expenses, unreimbursed employee business expenses and many other possible expense deductions.
7. How marriage could increase your salary
It is important to review your income tax withholdings at your W-2 job. In some instances, it may be beneficial to claim an extra exemption for income tax withholding purposes (for your new spouse), resulting in less taxes being withheld and a pay increase to you! You should use this strategy only if you anticipate a tax refund at the end of the year. If you owe taxes, you may be liable for additional interest and/or penalties if you are under-withheld in the tax department.
8. How marriage could increase your savings
You should also review retirement the plan options for both spouses, as in some instances contributions to a Roth IRA or other tax-favored plan may now be available to newly-married couples.
9. Home sweeter home
For couples who each owned a personal residence before the marriage, there may be some tax breaks available when selling one of the homes. For instance, if a home is sold as a result of combining two households, newlyweds may be able to exclude some or all of the capital gains. If the seller owned and used the home as a main residence for at least two of the past five years before selling it, he or she can exclude $250,000 of capital gains. Once married, the amount doubles to $500,000 if the couple files jointly and meets certain ownership and use tests. This is one area in which a small amount of tax planning can reap very large financial rewards via tax savings.
10. Move it or lose it
If one or both spouses change addresses following the marriage, it is important to file a change of address (Form 8822) with the IRS so that you are kept aware of any notices, refund checks or other tax matters.
Scott M. Estill is the author of TAX THIS! An insider’s Guide To Standing Up to the IRS. He is a tax attorney and former IRS Senior Trial Attorney who operates out of Denver. Follow Scott on twitter at @TaxThis.