Have you recently gotten married? If so, congratulations! Getting married is one of life’s biggest events. It also requires a lot of time and effort to seamlessly merge two households into one. While I can’t help you decide where to live, how to decorate, and which color to paint the walls, I can help you better understand how getting married impacts your tax situation. We’ll also cover some of the steps you should take after getting married to get started down the right financial path so you can focus on what matters most – your family!
Financial Steps to Take After Getting Married
One of the first things you should do is update all your accounts and profiles. This is especially true if one of you decide to change your name. Here are some common places you will need to update your information to reflect your marital status (and name change, if applicable):
- Social Security Administration: Update your name, marital status, address, and request a new Social Security Card.
- Internal Revenue Service: Submit Form 8822, Change of Address. This ensures the IRS has your current contact information.
- Other government agencies: Update your driver’s license information, voter registration, forward mail at the post office, contact your state tax agency, and make other updates as required.
- Employment information: Review and update your W-4 withholding status, insurance policies through your employer, and other Human Resources documents.
- Banking and Financial Accounts: Decide if you want to have joint or separate financial accounts. Update your information accordingly.
Once you make these changes, you can focus on the next step – completing your first tax return as a married couple. Expect there to be a few changes!
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How Getting Married Impacts Your Tax Return
The IRS considers a couple married if your wedding took place by December 31 of the tax year. This is important because being married can affect how you file your taxes.
Upon marriage, you can now choose to file either Married Filing Jointly or Married Filing Separately. Most people find that Married Filing Jointly offers a lower tax obligation. However, some people find that filing their tax return as Married Filing Separately gives them a better return.
I’d love to tell you there is a blanket rule for determining which is best for your situation, but you really should consider all aspects of your return before deciding how to file. This includes considering factors such as tax deductions and credits, whether you itemize your deductions, retirement account participation, and other factors.
Many people find it best to do their return both ways and choose whichever method is most favorable. Thankfully, many software programs will automatically run the calculations for you.
Aren’t sure the best way to file your taxes? Try using the H&R Block Tax Calculator. This free tool helps you easily estimate your refund or how much you’ll owe in taxes. Give the H&R Block Tax Calculator a Test Run.
Getting Married Can Have a Serious Impact on Your IRA Contributions
Getting married shouldn’t affect most employer-sponsored retirement accounts, such as a 401k. But it may affect your IRA contributions.
To begin with, you need to have earned income to fund an IRA. In short, that means if you don’t work, you can’t open or contribute to an IRA. But there is good news: getting married opens the door for a non-working spouse to contribute to their own IRA if certain conditions are met. Score!
You can make a Spousal IRA Contribution if:
- You are married filing jointly
- The IRA is held in the non-working spouse’s name
- The working spouse must have earned income that exceeds the amount of contributions
- The non-working spouse must be under 70 ½ in the year of the contribution if contributing to a Traditional IRA. There is no age requirement for a Roth IRA.
What if both spouses are already working?
The above is good to know even if it doesn’t apply to you at the moment. It will come in handy if your family becomes a one-income household in the future. But getting married can still impact your ability to contribute to an IRA even if both spouses are working. Roth and Traditional IRAs have contribution limits based on the taxpayer’s Modified Adjust Gross Income (MAGI). These limits affect who is eligible to participate in these plans. For example:
Traditional IRA income limits for deductions:
|2020 Traditional IRA Deduction Limits|
If Your Filing Status Is...
|And Your Modified AGI Is...||Then You Can Take...|
|Single or Head of Household||$65,000 or less||a full deduction up to the amount of your contribution limit.|
|more than $65,000 but less than $75,000||a partial deduction.|
|$75,000 or more||no deduction.|
|Married Filing Jointly or Qualifying Widow(er)||$104,000 or less||a full deduction up to the amount of your contribution limit.|
|more than $104,000 but less than $124,000||a partial deduction.|
|$124,000 or more||no deduction.|
|Married Filing Separately||less than $10,000||a partial deduction.|
|$10,000 or more||no deduction.|
|If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "Single" filing status.|
- Single Filer or Head of Household: Contributions are fully deductible with a MAGI under $65,000. Phase-outs start with income above $65,001. Deductions are not eligible with income above $75,000.
- Married Filing Jointly: Contributions are fully deductible with a MAGI under $104,000. Phase-outs start with income above $104,001. Deductions are not eligible with income above $124,000.
- Married Filing Separately: Deductible contributions begin to phase-out with MAGI of $0, and are completely phased-out one MAGI exceeds $10,000.
Roth IRA Income limits for eligibility:
|2020 Roth IRA Income Limits|
If Your Filing Status Is...
|And Your Modified AGI Is...||Then You Can Contribute...|
|Married Filing Jointly or Qualifying Widow(er)||$196,000 or less||up to the limit|
|more than $196,000 but less than $206,000||a reduced amount|
|$206,000 or more||Zero.|
|Married Filing Separately and You Lived with Your Spouse at Any Time During the Year||less than $10,000||a reduced amount|
|$10,000 or more||Zero.|
|Single, Head of Household, or Married Filing Separately and You Did Not Live with Your Spouse at Any Time During the Year||$124,000 or less||no deduction.|
|more than $124,000 but less than $139,000||a partial deduction.|
|$139,000 or more||Zero.|
- Single Filer or Head of Household: Full eligibility for MAGI under $124,000. Phase-outs start at above $124,001. Ineligible with income above $139,000
- Married Filing Jointly: Full eligibility for MAGI under $196,000. Phase-outs start at above $196,001. Ineligible with income above $206,000.
- Married Filing Separately: Allowable contributions begin to phase-out with MAGI of $0, and are completely phased-out one MAGI exceeds $10,000.
Be sure to take your joint income into account before you contribute to an IRA.
Getting Married May Affect Your Health Insurance and Health Savings Account Contributions
Your health insurance options may change after you get married. For example, you are no longer eligible to be covered under your parent’s health insurance policy once you are married. So you will need to find a new health insurance plan if you were previously using your parent’s policy. If you already had your own plan, then it’s a good idea to consider combining health insurance. You may find that you can save money by bundling health insurance policies under the spouse with the more favorable plan.
Health Savings Accounts (HSAs) are another factor. HSAs offer several excellent tax advantages. Contributions are tax-deductible (or are pre-tax if made through payroll deductions). Earned interest is tax-free, and you can make tax-free withdrawals for qualified medical expenses. To qualify, you need to have a high-deductible health care plan. And, as you may have guessed, there are annual HSA contribution limits:
- HSA individual contribution limit: $3,550
- HSA family contribution limit: $7,100
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