Money and Tax Tips for Newly Married Couples
Congratulations on the happy news! Now that you two have tied the knot, it’s time to go ahead and give your finances a head start by creating your money game plan and optimizing your taxes.
Get on the Same Financial Page
Before getting into specific tax credit and deductions to look into, the two of you need to make sure you’re on the same page when it comes to your finances. Money can be a sensitive subject so instead of just simply crunching the numbers, you may want to set aside some time to talk about your goals and plans for the next year, five years, and beyond. Some things you may want to talk about may include:
- Do you want to own a home?
- Do you want to start a business?
- Are you planning on expanding your family and having children?
- Do you plan on traveling?
Knowing what you’re saving up for makes it so much easier for both of you to make a budget or spending plan that suits those goals.
Combining Your Finances
Now that you have an idea of what you want, it’s time to run the numbers. Look at all your current assets, liabilities, and obligations. You want to make sure that everything is on the table for both of you to see. If you haven’t already, review your finances so you can merge relevant accounts fairly easily. We’ve found that having a joint checking and savings account has made managing our finances much easier.
Know Your Tax Benefits
Now that the two of you have a game plan for your money, it’s time to help achieve them by taking advantage of applicable tax benefits when you file as a married couple. TurboTax will help you file as a married couple for the first time by asking simple questions about your life together.
Marriage Tax Rates
There are different tax rates for individuals and married couples filing jointly. Let’s say that you and your spouse earn $35,000/year each. As a single person filing (or married filing separately), your tax rate would be 15%. As a married couple filing jointly you can earn $70,000 and still remain in the 15% bracket , while a person filing single would now be in the 25% tax bracket.
Dependent and Personal Exemptions
Though not directly tied with marriage, many couples benefit from claiming dependent and personal exemptions. Basically for each one you claim (and qualify for), you will be lowering your taxable income (currently the exemptions are $3,900 each).
Make Investing a Priority
Besides contributing to your company’s 401(k), the two of you should consider supplementing your investing with IRAs. One of the big advantages of IRAs is the amount of control you have over your contributions. Each of you can contribute $5,500/year ($6,500/year of you’re 50 or older) for a combined total of $11,000/year ($12,000/year if you’re 50 or older).
If you file a joint return, both of you can make IRA contributions even if only one of you has taxable compensation by opening a spousal IRA. Please keep in mind that your total combined contributions can’t be more than your compensation that you report for the year.
Looking to contribute more to your IRAs? I share some painless ways to find money in your current budget to do just that. One easy way to manage your IRA is by investing in low cost index funds. These investments track a market index such as the S&P 500.
Thoughts on Handling Taxes as Newlyweds
How many of you are filing your taxes as a couple for the first time? What are some of your goals for the next year and beyond?